Allianz Australia Insurance Limited v Olver
[2003] VSC 101
•3 April 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 2096 of 1998
| ALLIANZ AUSTRALIA INSURANCE LIMITED (ACN 000 122 850) | Firstnamed Plaintiff |
| and | |
| CLUB MARINE LTD (ACN 007 599 347) | Secondnamed Plaintiff |
| v | |
| ANTHONY CRAIG OLVER | Firstnamed Defendant |
| and | |
| WONDERFIELD PTY LTD (ACN 007 416 926) RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) | Secondnamed Defendant |
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JUDGE: | Balmford J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13, 14, 17 and 18 March 2003 | |
DATE OF JUDGMENT: | 3 April 2003 | |
CASE MAY BE CITED AS: | Allianz Australia Insurance Ltd v Olver | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 101 | |
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INSURANCE – Allegation of fraud in relation to claim of damages for sunken vessel – whether insured deliberately sank the vessel or permitted it to sink – claim found to be fraudulent – whether monies obtained held on constructive trust for insurance company.
Black v Freedman (1910) 12 CLR 105
Fowkes v DPP [1997] 2 VR 506
Boscawen v Baja [1996] 1 WLR 329
Gertsch v Atsas [1999] NSWSC 898
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D G Collins SC Mr M Wise | Brand Partners |
| For the Secondnamed Defendant | Mr G Lucas | Fitzpatrick Teale |
HER HONOUR:
Introduction
This proceeding, commenced by writ issued on 21 December 1998, arises from the sinking of the yacht “Mariah” (“the vessel”) on 4 June 1998 at Line Reef, Queensland. MIM General Insurance Limited, the predecessor of the firstnamed plaintiff (“Allianz”) was the insurer of the vessel at the time, and the secondnamed plaintiff (“Club Marine”) was acting as its agent. The firstnamed defendant (“Mr Olver”) was the owner and master of the vessel. The secondnamed defendant (“Wonderfield”) was a company controlled by Mr Olver. After the sinking, Mr Olver claimed under the insurance policy and the plaintiffs paid him the sum of $324,000 on that claim on 10 November 1998. A substantial proportion of that amount was transferred to Wonderfield and used to discharge the secured debt of Wonderfield to the ANZ Bank. After two unsuccessful attempts to salvage the vessel, Allianz sold it for $5,000 “as is, where is” to Mr Dempsey and two colleagues, who carried out a successful salvage operation over 27 to 29 November 1998. None of the foregoing is in dispute.
Mr Collins, for the plaintiffs, indicated in his closing address that the evidence established that it was Allianz which was the party to the insurance agreement, although it was entered into as a result of its agent, Club Marine, executing the policy as agent on behalf of Allianz. That being so, he conceded that, if the plaintiffs were successful, it was Allianz which would be entitled to judgment, and not Club Marine. The claim against Mr Olver was for damages of $324,000, plus $111,339.10 being costs and expenses involved in investigation and attempts to salvage the vessel, less $5,000 received on sale of the vessel, giving a total claim of $430,339.10, together with interest pursuant to statute to be calculated at the day of judgment. The amount of the damages, costs and expenses, should the plaintiffs be successful, is not in dispute.
The relief sought against Wonderfield is twofold:
1.An order that Wonderfield pay to Allianz the sum of $275,654.99 with interest pursuant to statute to be calculated at the day of judgment.
2.An order and declaration that the assets and undertaking of Wonderfield including the land described in Certificate of Title Volume 10099 Folio 937 are subject to an equitable charge in favour of Allianz to secure repayment of the sum of $275,654.99 paid to it on 23 November 1998.
Mr Lucas announced his appearance for Wonderfield, instructed by the receiver and manager. He indicated at the outset of the hearing that his interest related solely to the receiver’s interest as the appointed representative of a debenture holder. Should the Court ultimately determine to make a declaration of the type sought against Wonderfield, he sought an opportunity to be heard on the handing down of the judgment as to the form of the orders to be made. That request was not opposed by counsel for the plaintiffs. On that basis Mr Lucas was excused from further attendance until the delivery of the judgment.
Mr Olver was not present in Court at the time of this discussion, having not appeared when the case was called on. He appeared as Mr Collins was commencing his opening address, and I adjourned the hearing to enable Mr Lucas, at my request, to explain to Mr Olver, who was unrepresented, what had taken place in his absence. The hearing then proceeded, with Mr Olver taking his place at the Bar table. While he had been represented at an earlier stage of the proceeding, he indicated that he was now unable to afford legal representation.
The plaintiffs placed before the Court witness statements, some with attachments, from the following:
Mr Johnson, National Claims Manager of Club Marine;
Mr Drent, who operates a sales agency for cruising yachts;
Mr Webster, a marine assessor, who was engaged by Club Marine to oversee the initial salvage attempts and to assist in the raising and subsequent assessment of the vessel;
Mr Day, who interviewed Mr Olver and his brother after the sinking on instructions from Club Marine;
Mr Dempsey, one of the successful salvagors;
Professor Joubert, Emeritus Professor of Mechanical Engineering at the University of Melbourne, who has considerable experience as a yacht designer and yachtsman;
Professor Bullen, Professor of Engineering in the University of Tasmania;
Mr Corbett, formerly Manager of the Physical Infrastructure Centre Research, Investigation and Development Unit in the faculty of Built Environment and Engineering at the Queensland Institute of Technology; and
Mr Fitzgerald, a marine consultant.
Mr Olver sought to and did cross-examine only Mr Webster, Mr Dempsey, Professor Joubert and Mr Fitzgerald. Mr Dempsey’s evidence was given by video link from Mackay. Mr Olver gave oral evidence and called his brother, Mr John Olver, who was the only other person on board the vessel at the time of the sinking, and his financial adviser, Mr Caines. All three provided witness statements.
The claim against Mr Olver
It is common ground that the cause of the vessel sinking was the entry of water through two holes in the fibreglass hull, one being apparently created by an impact (“the first hole”), and the other created by the removal of the transducer log (“the second hole”). Mr Olver, in his claim made to Allianz under the insurance policy, stated that those two holes were caused by the vessel colliding on two occasions with a coral reef. Allianz contends and Mr Olver denies, that those two holes were created by Mr Olver, and that he deliberately sank the vessel or permitted it to sink. Allianz further contends that Mr Olver’s statement in the claim under the policy thus constituted a false and untrue representation and warranty, made in the knowledge that it was false or in reckless indifference to its truth or falsity, and relied on by Allianz in paying the claim, and in incurring expenses in investigating the claim and salvaging the vessel, Allianz being therefore entitled to the repayment of the sum of $324,000 and to its costs of investigation and salvage.
While the legal basis of the plaintiff’s claim is put in issue on the pleadings, Mr Olver made no submissions at the hearing in support of any legal contentions. Nor were any submissions made or evidence called in support of the counterclaim, as to which no more need be said.
Thus the sole matter in issue as between Allianz and Mr Olver is whether or not Mr Olver deliberately sank the vessel or permitted her to sink. The onus of proving that he did so is, of course, on Allianz. Much of the evidence is undisputed, and where this is the case I have not always found it necessary to say so.
Mr Olver is a cray fisherman of some ten years experience, having been trained by his father, and holds a class 5 Master’s certificate of competency, which is a commercial qualification. He is also a qualified marine engine driver. At the relevant time he had been cray fishing for ten years and owned his own cray boat and a 66 pot cray fishing licence. He was the sole owner of the vessel, having owned it for some three years, and there was no money owing on it. The vessel had been listed for sale with Mr Drent since October 1996, initially with a price of $350,000, reduced in October 1997 to $300,000. No firm offers had been received, and at the relevant time it was still for sale.
Mr Olver’s account of the sinking was given in his interview with Mr Day on 8 June 1988 (which was incorporated by reference in his claim made under the policy) and in his evidence before the Court. Much of this material is challenged by Allianz. He said that the vessel had been moored at Hamilton Island since September 1997. He and his brother had arrived at Hamilton Island on Tuesday 2 June 1998. At Abel Point Marina they had purchased a new outboard motor for the vessel’s tender because the existing outboard was defective in that it was impossible to select a gear. They also purchased a new portable GPS navigation device because the old one was not working. They headed for Line Reef to go fishing. Mr Olver had not had much experience in the reef waters of the Whitsundays, and had only been to Line Reef once before. The intention was that he and his brother would have a few days fishing and would be joined on the Saturday by their wives and children for a family holiday.
When they reached Line Reef they anchored, with the anchor on a chain, and went fishing in the tender. When they returned the anchor winch had broken and they had to hand haul the last half of the chain, which was very heavy. Accordingly, when they anchored for the afternoon and night they used only three or four fathoms of chain and a ¾ inch rope. They were in 6-8 metres of water, in an area where there were numerous “bombies”, of a size to be shown on the chart. A “bombie” is a lump of rock or coral, usually submerged, which is detached from the main body of the reef. The vessel carried a shallow water alarm, which they did not activate, so as not to flatten the batteries. They had no arrangement whereby either of them was to get up to take watch during the night. Sea and wind conditions were not such as to give cause for concern. They did some fishing, had dinner and went to bed at about nightfall. They had not been drinking.
Mr Olver said that he was woken by the vessel “bumping and crunching”, (or later “bumping and grinding”), and knew that they were aground. He called his brother, who went to check the anchor, and retrieved only a few fathoms of frayed rope, without the anchor. He went to the wheelhouse, started the engine, and put the vessel astern so that they got off the rock. They were aground on the starboard side, where the vessel was rubbing. He described the impact as “a pretty good old clunk and bump”. He did not check to see if they were taking water. All he could think of was getting away from the reef.
After they had been under way for 5 or 10 minutes, the vessel grounded again on the starboard side. She did not come to a complete stop. Mr John Olver took the helm and Mr Olver went down to check the damage. He found that they were making water “just aft the midships, near the nav station”, but there was not enough water coming in to sink the vessel. He had no idea that they were going to sink.
Mr Olver said that at this stage all he could think of was getting clear of the reef, and he continued to head west and then northwest, hoping to make land at Hayman Island or elsewhere. He sent out distress calls and continued on a westerly or south westerly heading until the engine stopped. At that point they were adrift and unable to keep up with the flow of water. They had an electric pump which was operating continually and a hand pump, which was only being used on and off. They launched the life raft and took to the life raft and tender. The vessel stayed afloat for another hour and then sank. A helicopter had arrived from Hamilton Island, and directed a tender from the boat “Isis” to them: the “Isis” picked them up and took them into Hamilton Island the next morning.
The evidence of Mr Dempsey, who was responsible for the below water and diving aspects of the salvage operation, is that when it was recovered from the seabed the vessel was about 57 or 58 metres below sea level.
The first hole
Mr Olver’s submission is that the hole near the nav station was created by an impact on coral or rock. Professor Joubert describes that hole as follows:
The hole in the section of hull allegedly caused by collision with coral has a hole of roughly elliptical shape measuring approximately 20 mm by 15 mm on the major and minor axis respectively. Subsequent to the collision a “V” shaped piece had been removed at one end of the larger axis, as noted in [Mr Corbett’s test report]. I observed that a very large unevenly shaped chamfer has been removed on the inside of the hole to a depth at the hole of about 11 mm. The chamfer measures 55 mm x 50 mm. The chamfer is not concentric with the hole. A smaller, but significant chamfer exists on the outside of the hole and is about 10 mm greater in radius than that of the hole. The gel coat is unevenly chipped (brittle fracture) at the perimeter of this chamfer.
Mr Corbett, on instructions from Professor Bullen, made two test holes, of the same order of size as the first hole, in a section of the hull adjacent to the first hole. After those tests Professor Bullen concluded that it was extremely unlikely that the penetration observed in the first hole could have been made by coral.
Professor Joubert pointed out that (as is apparent on the most casual observation) as the forcing pieces had broken through the fibreglass in the test holes, long tendrils of fibreglass had been pushed out of the hole away from the skin. There were no such raised fibres around the first hole. He had had the experience of cutting fibreglass with a hammer and chisel, and the inside chamfer was of the same appearance. The ends of the bundles of fibres appeared to have been cut and lay close to the surface of the crater. The formation of the inside of the crater was consistent with having been shaped by mechanical means.
The first hole is at right angles to the fibreglass hull. Professor Joubert said that in order to create that hole by impact with rock or coral, and taking into account that at that point the hull was at an angle to the perpendicular, the vessel would have needed to be dropped on the rock or coral, for example by drifting sideways and being lifted by a wave and dropped on to a rock. The impact needed would have been very forceful and would have been unforgettable to those on board at the time. I note the evidence of Mr John Olver that whatever happened at the time of the first grounding did not wake him up, and he was woken by his brother calling out; and Mr Olver’s description of being woken by the vessel “bumping and crunching” or “bumping and grinding”.
Mr Olver’s evidence as to the first grounding appears in [13] above. In his closing address he submitted that the motion of lifting and dropping is the motion that a boat has when it is on the ocean, and is caused by the waves lifting and dropping it. Thus, in his submission, Professor Joubert’s evidence supported his argument. However, it is clear to me from his evidence read as a whole that Professor Joubert was not referring to the normal movement of a boat at sea, but to a much more severe impact, particularly having regard to the angle of the hole in relation to the angle of the hull. The only basis on which Mr Olver sought to explain the difference between the first hole and the test holes, which is described in [19] above, was that the loose fibres around the first hole were washed off by high powered washing after the vessel was raised. However, Mr Webster said that he inspected the vessel on 29 November, before it was taken to the slipway and pressure cleaned, and there were no loose fibreglass particles present on the inside surface of the hole.
Mr Webster said that when he saw the first hole it had already been plugged by the divers with a rag or some other material. The hole was easily accessible from inside the vessel and could easily have been plugged by Mr Olver. Based on his experience in observing, assessing and overseeing the repair of some 250-300 vessels which had been grounded on coral, it was his opinion that the damage evident on the outside face of the hull around the first hole was inconsistent with an impact with coral. The damage on the inside face was also inconsistent with an impact on the external face of the hull.
Mr Fitzgerald has inspected many fibreglass hulled vessels which have grounded. In his opinion the condition of the section of the hull containing the first hole was not consistent with the hole being caused by impact on coral or rock reef. The absence of significant scratching was also inconsistent with Mr Olver’s description of either grounding.
Both Mr Webster and Mr Fitzgerald considered that the first hole could easily have been plugged, particularly as it was in an accessible location. Mr Fitzgerald said that this would immediately have been the obvious thing to do for a seaman of Mr Olver’s experience and qualifications. Neither witness was cross-examined on this point. Mr Olver conceded that he could have plugged the hole with his thumb, which would indicate that he was aware that it could readily have been plugged with some other object.
The second hole
The second hole in the hull was created by the removal of the transducer log, which measures the speed of the vessel, from its skin fitting. The transducer log is contained in a cylinder some 10 cm long and 4 cm in diameter, which normally fits tightly into the skin fitting. The skin fitting pierces the hull, creating a cylindrical hole at right angles to the hull. When the transducer log is in place, plugging the hole, the end of the skin fitting is flush with the outside of the hull, leaving a small paddle wheel protruding, which turns on a very fine axle. On the inside of the hull the transducer log is secured in the skin fitting by a bronze nut, which screws on to a thread on the outside of the skin fitting. The lead from the transducer, which carries the information, passes through the centre of the nut, and a metal split ring ensures that when unscrewed the nut will remain with the skin fitting.
When the vessel was raised in the salvage operation and water was being pumped out of it, Mr Dempsey observed water entering through the hole where the transducer log should have been, and another diver plugged it with a timber dowel plug. Mr Olver conceded that there was evidence to show that the hole was present when the vessel lay at the bottom of the ocean prior to being raised. When the vessel was examined on the slipway after being raised, the transducer was not in the skin fitting and the nut was not in place.
Professor Joubert examined the transducer log and skin fitting. He noticed damage to the thread, which was consistent with the nut having been wrongly applied at some stage. In his opinion the damage to the thread had no connection with the log being removed as a result of a collision with a rock or coral. The paddle wheel blades showed no evidence of any damage or marks, and the axle on which the paddle wheel spins appeared to function correctly. In his opinion, if the log was in position and the paddle was struck a blow sufficiently forceful and in the correct axial direction to eject the log from the skin fitting, there would necessarily be signs or marks or breakage consistent with that event, even if the nut was not in position. It would not be possible for the log to be struck with sufficient force, and in a direction which would remove the log, without an impact to the paddle wheel. The absence of any marks or damage to the paddle wheel meant that the log could not have been removed as a result of an impact with coral or rock.
Mr Olver conceded that any severe impact on the transducer would have caused some visible damage to the paddle wheel. He asked Professor Joubert in cross-examination why the damage to the thread could not have resulted from collision with coral or rock. Professor Joubert replied that the removal of the tops of a few threads did not occur around the full circumference, but only occurred around a portion of the circumference; less than half, and more like a quarter. He said that he had himself applied the nut to the skin fitting, both with the log in place and without, and it was his considered opinion that it would hold the log in place quite properly.
Mr Olver submitted that the transducer was dislodged on impact with the reef, and further that the bronze nut was similarly forced off the skin fitting by such an impact, and that it was this which caused the damage to the thread. He put to Professor Joubert that a blow on the hull adjacent to the paddle wheel could have distorted the skin fitting without damaging the paddle wheel and its axis. Professor Joubert answered that anything was possible but he thought it most unlikely.
No evidence was before the Court of damage to the hull adjacent to the paddle wheel. Mr Olver put it to Mr Dempsey that there was considerable damage to the keel and to the starboard side of the hull forward of the rigging. Mr Dempsey replied that there was not considerable damage. There were some markings to the keel and on the port side of the hull, and a hole where the transducer log (described by him as the “speed line”) had been removed and was lying inside the hull. The marks on the port side were only light indentations. It is to be remembered that Mr Olver described the first grounding as being on the starboard side, and the vessel “bumping and crunching” or “bumping and grinding” and the second grounding as also being on the starboard side.
Generally
It is apparent from the evidence of Mr Webster that the section of hull containing the fitting for the transducer log and the section containing the first hole and the two test holes were examined by a firm of engineers retained by Mr Olver, whose premises Mr Webster visited in order to take photographs of both sections of hull. However, Mr Olver called no expert evidence to explain why the transducer log was absent from the skin fitting, or to support his submission set out in [21] above, or to challenge any of the expert evidence called by the plaintiffs. The inference can be drawn that the opinion of those who examined the section of hull would not have assisted him.
Mr Fitzgerald considered that the account of events given by Mr Olver to Mr Day was inconsistent with the conduct of a master with over ten years of professional experience in the following ways:
i.Such a person would have appreciated the danger of using a rope anchor among coral reefs, even though a chain anchor would have had to be recovered manually if the electric winch was not working;
ii.he would have been aware that when anchoring the swing circle of the vessel must be estimated to allow for wind and tide changes; Mr Olver described the boat being anchored in a position to bring the anchor rope into contact with an abrasive material sufficient to chafe it through;
iii.he would have posted an anchor watch;
iv.he would have turned on the depth sounder and shallow water alarm;
v.before moving away from the impact site under power, which would increase the flow of water through any breach in the hull, he would have ascertained whether there was any such breach to the hull or any water in the bilges;
vi.he would know that it was dangerous to move the vessel without first examining the area to try to avoid further collision;
vii.he would have plugged the first hole (see [24] above).
Mr Fitzgerald could not think of any explanation for Mr Olver’s not continuing to use both the pumps, or to bail.
As to i. above, Mr Olver put it to Mr Fitzgerald in cross-examination that it was a difficult task to haul an anchor on a chain manually, to which Mr Fitzgerald replied that it was very difficult, but was better than breaking adrift. As to ii., Mr Fitzgerald said that with the change of tides the rope would have been taken to the bottom of the sea bed and come into contact with coral. As to iii., Mr Olver put it to Mr Fitzgerald that holiday yachtsmen did not post anchor watches, and Mr Fitzgerald drew a contrast between holiday yachtsmen and professionals. As to iv., Mr Fitzgerald agreed when Mr Olver put to him that flat starting batteries in the morning would be a peril. As to v., Mr Olver put it to Mr Fitzgerald that the venturi effect crates a suction which drags the water out. Mr Fitzgerald replied that the speed of a yacht was normally insufficient to create that effect.
As to vii., the transcript of the cross-examination reads:
Are you seriously suggesting, here, that I should have left the vessel at point of impact in the hope that the coral or rock that had damaged the vessel could somehow act as a plug for the hole whilst the vessel was bumping and grinding and moving about on that obstruction? --- I am sorry, what paragraph was that in?
That is page 4, paragraph 5, of your statement? --- I wouldn't - to move the vessel if it had come into impact and not sound the bilges or to see whether there was any ingress of water is not the actions that a seaman would take. First, you ascertain what damage had been caused by the bumping and grinding before attempting to move the vessel, because in some circumstances, with all groundings, it might be far more prudent to leave the vessel where it is than to try and move the vessel into deeper water where the vessel may sink; and also that while the vessel is on a reef or a rock, that if it is sitting on that rock, that rock can stem the ingress of water into that area until other - - -
Even given that the vessels were moving? --- Moving up and down on the reef?
Up and down, rolling, bumping and grinding? --- Yes.
I refer you again to the same paragraph, where you suggest that I first should have ascertained breaches to the hull, in the dark, whilst still grinding and bumping, possibly sustaining more damage, rather than move my vessel and my crew away from immediate danger? --- Well, to move away from an area that you don't know, in the dark, is running a huge risk of causing more damage than what is already happening at the particular time. The fact of stern tubes, propeller shafts, rudder shafts, coming into contact with other areas is a serious area that you can get into more trouble. It doesn't take much, even in the dark, when the boat does have lights and torches, to go and check the bilges to see whether water is coming in.
Mr Fitzgerald was not cross-examined as to the use of the pumps or bailing.
The evidence of Mr John Olver, who had been present on the vessel as crew, was consistent with that of his brother. In answer to the carefully phrased question: “John, at any time while aboard the Mariah on the trip in question, did you see me do anything deliberate to attribute to the loss of the Mariah?” he replied “No”. He has been a commercial cray fisherman and holds a certificate of competency as a skipper grade 3. He said that after the first grounding they did not think that the vessel had sustained any damage. He took the helm after the second bump, and his brother went downstairs and came back and told him that they were taking water from the starboard side. He was the crew and his brother was the skipper, and he remained at the helm as instructed until they left the vessel. His brother did not consult with him about what action they should take.
Mr John Olver was not an impressive witness. In particular, he was extremely reluctant to answer straightforward questions about the manner of preparation of his witness statement, which had been prepared only two days before he gave his evidence. The impression created was that he did not know what answer to the questions would be best for his brother’s case, and accordingly was reluctant to give any answer at all. He presented the improbable picture of having taken little interest in the events associated with the sinking of the vessel.
Mr Olver said that he had always been taught that the first responsibility of a master was to return his crew to shore alive. He would not risk his life and the life of his crew, or his brother, for financial gain. He said that he might have been careless, and too much in holiday mode, but he had done nothing to sink his vessel. After the grounding he was entirely focussed on removing the vessel and his crew from the immediate danger of the reef and trying to make landfall, as a priority over attempting futile repairs. He had to regain control of the drifting boat, navigate away from the reef, transmit and receive radio messages, ascertain their position so that they could be found, and give instructions to his crew. When he decided to concentrate on heading for land, he did not know that there were two holes through which water was coming in. The sinking of the vessel was an accident.
He said that he had no reason to want to sink the vessel. If he had needed money he would have gone to sea in his work boat and caught crayfish in Bass Strait. He was good at catching crayfish, at that time the industry was doing well, and his was one of the most successful boats. There was no debt owing on the vessel. He had spent some $48,000 to maintain it in good condition. He had plans for it to be used for recreation in the short term for family and friends, and plans for a syndication agreement for holiday timeshare from which he stood to earn $400,000. He said that he had commitments from buyers of all the time shares except several which he was retaining for his own family.
However, the evidence of Mr Caines, Mr Olver’s financial adviser, was that at the time of the sinking no person had executed a document giving a binding obligation to subscribe to the timeshare arrangement, and no money at all had been paid. Further, I note that at that time the vessel was still listed for sale with Mr Drent at a price of $300,000, reduced from $350,000, which would appear to be inconsistent with an expectation of receiving $400,000 from the proposed syndication. Mr Caines produced a copy of a form of syndication agreement relating to the vessel which he had apparently just found among his papers. Mr Collins pointed out that that document had not been discovered. That being so, and given that Mr Olver was legally represented at the time of discovery, I am not in a position to make any finding as to the date when that document was prepared.
When interviewed by Mr Day shortly after the sinking, Mr Olver said that he had assets of close to two million dollars, and owed between $300,000 and $400,000, and he repeated in evidence before the Court that that had been his position at that time. In cross-examination he said that those assets included a cray boat, a cray fishing licence and two houses. He expressed himself as being unable to remember with any precision what he had paid for any of these assets or what he had received when he sold them. He appeared to be uncertain as to whether he was including Wonderfield’s assets as his own. He agreed that after receiving the sum of $324,000 from Allianz after the sinking of the vessel, and using much of it to discharge Wonderfield’s debt to the ANZ Bank, his debts would have been reduced to approximately $100,000.
Mr Olver said that he now had no money. He estimated reluctantly, saying that the amounts were “very very approximate”, that since the sinking he had sold the cray boat and crayfish licence and one house for $350,00, one million dollars and $225,000 respectively, making a total of $1.575 million. He expressed himself as unable to remember what had happened to that money, save that some had gone on legal costs, some had gone on living expenses for his family, and he had lent $100,000 to his father without security. He did not know what Wonderfield had done with the proceeds of sale of the crayfish licence, which belonged to it, and was unable to explain why Wonderfield had been put into liquidation, although he is the sole director of Wonderfield and owns 97 of 100 issued shares. However, when he was asked whether Wonderfield had been put into liquidation because of failure to pay legal costs ordered against it in this proceeding, he agreed. He said that he left his financial affairs to his financial adviser and his accountant, and that they controlled Wonderfield. He agreed that a bankruptcy notice had been served on him on 3 March 2003, shortly before the hearing, also in respect of unpaid costs.
I would have great difficulty in accepting that anyone of Mr Olver’s acumen – evidenced not only by his qualifications and experience but also by the manner in which he conducted himself in the unfamiliar situation of an unrepresented party to litigation in this Court – could be as ignorant of his own financial affairs as Mr Olver, under cross-examination, endeavoured to present himself to be.
Mr Caines said that he had been the principal financial adviser of the Olver family for some twenty years. He is a qualified and experienced marine engineer. He practised as an accountant for a number of years, and more recently as a financial adviser, having closed his accounting practice. He said that as a financial adviser, he would attempt to map out a path by which Mr Olver could achieve what he wished to achieve. Mr Olver put to him that he had not had much input into his own financial transactions, being interested only in the net result, and Mr Caines agreed.
Mr Caines said that Mr Olver was, at present, technically insolvent. The bankruptcy petition had been issued by the plaintiffs’ solicitors, the Taxation Office had an action against him for some $200,000 and there were other creditors. His liabilities were of the order of $500,000.
Mr Caines said that in 1998 the cray boat, the crayfish licence and one house in Portland had been owned by Wonderfield, as trustee of the Anthony Olver Trust; the other house had been owned by Mrs Olver. The only asset owned by Mr Olver at the time of the sinking was the vessel Mariah. The proceeds of sale of the various assets had been distributed to Mrs Olver as a beneficiary of the Anthony Olver Trust of which Wonderfield was the trustee. Mrs Olver’s net assets were at present probably one and a half million dollars. She made independent decisions with regard to her share portfolio. I note that there is no evidence to suggest that Mrs Olver is not on good terms with Mr Olver, or that she would be reluctant to meet his liabilities. However, Mr Caines said that he had not had a conversation with Mrs Olver as to whether she would be prepared to do so. Despite his expressed concern about the bankruptcy notice, he was reluctant to answer questions as to what was proposed to be done about it. He said that he had not asked Mr Olver whether he had asked his wife for money to meet his liabilities, nor had he advised him to ask her. This is surprising, in a financial adviser to the sort of client that Mr Olver seeks to present himself as being.
It is inconceivable that Mr Olver, when expressing ignorance of his financial affairs under cross-examination, was unaware that the proceeds of sale of the assets had been distributed to his wife and were under her control.
Mr Olver’s financial affairs are not directly relevant to the issue before the Court save insofar as they may shed some light on the peripheral matter of motive. However, his evidence on those affairs does not arouse confidence in his credibility, on which this case largely turns. The evidence of Mr Olver and Mr Caines as to the state of the plans for syndication at the time of the sinking is inconsistent. I do not accept Mr Olver’s purported ignorance of his financial affairs. Mr Caines adopted what was put to him as to Mr Olver’s ignorance. However, having expressed himself as concerned about the bankruptcy notice, he has not (if he is to be believed) taken the obvious steps to deal with that situation, and to assist his allegedly ignorant client by advising him to ask his wife for the money. If (which I do not believe) Mr Olver did not know that his wife had received the proceeds of the sale of the assets, he would certainly need his financial adviser to suggest that he obtain funds from her to meet his obligations.
It is not possible to form any view as to the real state of Mr Olver’s financial affairs either at the time of the sinking or at present, or of the principles on which they are conducted. It can only be assumed that there was a purpose in the obfuscatory approach adopted by both Mr Olver and Mr Caines under cross-examination, and that that purpose was related to the attribution of a motive for the sinking of the vessel. Neither Mr Olver nor Mr Caines gave any explanation as to why, given the financial position of his wife, Mr Olver was not legally represented at the hearing.
The claim against Mr Olver - conclusion
Having considered the evidence before me in the light of the view which I have formed as to the credibility of Mr Olver, I am satisfied that neither hole could have been caused by the mechanisms which he submitted could have caused them. That finding is consistent with the expert evidence called by the plaintiffs, which is otherwise unopposed. I accept the expert evidence that Mr Olver’s account of what he did and did not do on the afternoon and night of the sinking of the vessel is not consistent with the standards of seamanship to be expected of a master of his qualifications and experience in the situation in which he claimed to have found himself. I cannot accept the evidence of Mr Olver that neither hole was deliberately made. I am satisfied, on the balance of probabilities, that he caused the sinking of the vessel and that accordingly his claim on Allianz was fraudulent.
There will be judgment for Allianz against Mr Olver in accordance with the claim set out at [2] above.
The claim against Wonderfield
The relief sought against Wonderfield is set out in [3] above. Save as indicated in [4] above, Wonderfield was not represented at the hearing. Mr Olver made no submissions on its behalf, in reply to the submissions of Mr Collins, and did not describe himself as representing Wonderfield.
It is not in issue that the sum of $324,000, being the proceeds of the claim brought by Mr Olver as a result of the sinking of the vessel, was paid into a joint bank account of Mr Olver and his wife on 13 November 1998. From that account, the sum of $275,654.99 (“the amount paid”) was transferred to Wonderfield without consideration and paid to a bank account of Wonderfield with the ANZ Bank. Wonderfield was the registered proprietor of certain land at Portland described in Certificate of Title Volume 10099 Folio 937 (“the Portland land”). It had given a fixed and floating charge over its undertaking and assets and a registered mortgage over the Portland land to secure all moneys owing by it to the ANZ Bank. The amount paid was applied to discharge the amount owing under the mortgage and charge; it is described in Wonderfield’s bank statement as “final payment and loan closed”.
Mr Collins relied on the judgment of the High Court in Black v Freedman[1] and cited the following passages from the judgments of Griffith J [2] :
It was pointed out by Sir George Jessel, in a well known case, that a man may at a certain stage be innocent, but that, if he knows that he has got the advantage of a fraud to which he was no party and says he will keep it, then he becomes himself a party to the fraud and is liable to the jurisdiction of the Court of Equity.
and O’Connor J [3] :
Where money has been stolen, it is trust money in the hands of the thief, and he cannot divest it of that character. If he pays it over to another person, then it may be followed into that other person's hands. If, of course, that other person shows that it has come to him bona fide for valuable consideration, and without notice, it then may lose its character as trust money and cannot be recovered.
[1](1910) 12 CLR 105
[2]at 109
[3]at 110
At the relevant time Mr Olver was the sole director of Wonderfield and held 97 of 100 issued shares. Accordingly, Mr Collins submitted, Wonderfield must be taken to have Mr Olver’s knowledge that the claim against Allianz was false and that the proceeds of the claim therefore constituted monies obtained by deception. Wonderfield thus took the amount paid with notice that this was the case. So, in the hands of Wonderfield, as in the hands of Mr Olver, the amount paid was trust money, held on a constructive trust for Allianz. Accordingly, Mr Collins submitted, Allianz was entitled to repayment of the amount paid with interest to the date of judgment.
He submitted further that if the amount paid had been used to acquire an asset, Wonderfield would similarly have held that asset on trust for Allianz. This submission is supported by the passage from the decision of the Court of Appeal (Winneke P, Charles JA and Southwell AJA) in Fowkes v DPP[4] where their Honours said:
If Ms Fowkes knew or had reason to suspect that the moneys [given to her by her de facto husband and with which she had purchased a car] were stolen [from the Commonwealth], then she held them in trust for the Commonwealth, and would similarly hold the car which she obtained with trust money;
[4][1997] 2 VR 506 at 522
However, in the present case, because the amount paid was used to discharge a debt, there was no property in specie to which the trust might attach.
In this context Mr Collins relied on the decision of the English Court of Appeal in Boscawen v Baja[5]. In that case, a building society advanced money to the purchasers’ solicitors for the purchase of a property, the loan to be secured by a charge. The purchasers’ solicitors paid the money to the vendor’s solicitors, who used it to discharge a mortgage on the property. At this stage the purchase fell through. Millett LJ, with whom Stuart-Smith and Waite LJJ agreed, said [6] :
If the plaintiff succeeds in tracing his property, whether in its original or in some changed form, into the hands of the defendant, and overcomes any defences which are put forward on the defendant’s behalf, he is entitled to a remedy. The remedy will be fashioned to the circumstances. The plaintiff will generally be entitled to a personal remedy; if he seeks a proprietary remedy he must usually prove that the property to which he lays claim is still in the ownership of the defendant. If he succeeds in doing this the court will treat the defendant as holding the property on a constructive trust for the plaintiff and will order the defendant to transfer it in specie to the plaintiff. But this is only one of the proprietary remedies which are available to a court of equity. If the plaintiff’s money has been applied by the defendant, for example, not in the acquisition of a landed property but in its improvement, then the court may treat the land as charged with the payment to the plaintiff of a sum representing the amount by which the value of the defendant’s land has been enhanced by the use of the plaintiff’s money. And if the plaintiff’s money has been used to discharge a mortgage on the defendant’s land, then the court may achieve a similar result by treating the land as subject to a charge by way of subrogation in favour of the plaintiff.
[5][1996] 1 WLR 329
[6]at 334-5
That authority was relied on in the decision of Foster AJ in Gertsch v Atsas[7] in the context where the plaintiff, as administrator of the estate of a deceased person whose will was found to have been a forgery, relied upon a proprietary claim in equity in respect of a payment made by the defendant to discharge the mortgage upon her home, using funds received by her under the forged will.
[7][1999] NSWSC 898
The claim against Wonderfield - conclusion
I accept those submissions of Mr Collins, and find that Allianz is entitled to an order against Wonderfield for the amount paid, with interest, and an order that the assets and undertaking of Wonderfield, including the Portland land, be charged with repayment of the amount paid. Mr Collins indicated that he could find no basis on which to justify charging the assets of Wonderfield with interest on the amount paid. There will be orders in terms of those set out at [3] above. I invite submissions from Mr Lucas as to the matter which he raised at the outset of the hearing.
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