Australian Executor Trustee Ltd v Suncorp Life & Superannuation Ltd - [2016] SADC 89

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
AUSTRALIAN EXECUTOR TRUSTEE LTD v SUNCORP LIFE & SUPERANNUATION LTD
[2016] SADC 89
Judgment of His Honour Judge Stretton
29 July 2016
INSURANCE - LIFE INSURANCE
INSURANCE - THE POLICY - OBLIGATION OF UTMOST GOOD FAITH
On 17 March 2008 a house on the outskirts of Renmark belonging to Mr and Mrs Humby exploded and burnt down. Mr Humby was killed in the fire. Mrs Humby claimed on the home and contents insurance and Mr Humby’s life insurance. The home and contents claim was vigorously investigated by the home and contents insurer and Mrs Humby eventually withdrew the claim. She maintained the life insurance claim. The life insurer refused to pay on the basis that the Humbys had concocted and pursued a scheme to burn the house down to make a fraudulent property insurance claim, and that in those circumstances Mrs Humby’s claim on the life insurance was also fraudulent, breached her duty of utmost good faith to the life insurer, and that it was against public policy to allow Mrs Humby to benefit from her wrongful act by claiming Mr Humby’s life insurance. In support of that position the insurer relied on circumstantial evidence including the family’s dire financial straits, forensic evidence that the fire was deliberately lit while Mr Humby was alone in the house, and a number of other matters.
Mrs Humby died a year later, the life insurer continued its refusal to meet the claim, and Mrs Humby’s estate sued.
Held:
1.       Absent a defence based on the Humbys’ actions in relation to the fire, the plaintiff is otherwise entitled to claim the benefit under the policy for the accidental death of Mr Humby.
2.       The Humbys did concoct and pursue a scheme to burn down the house for the house and contents insurance. Mr Humby was however accidentally killed when the house ignited prematurely.
3.       In the circumstances the life insurance claim was not made fraudulently, nor had there been a breach of the duty of utmost good faith to the life insurer.
4.       In terms of public policy, in the final analysis, whilst the Humbys’ unlawful conduct was serious, in light of the fact that the insured event was an accident which was neither contemplated, intended nor reasonably foreseen, that the claim was not fraudulently made, that the claim relates to life insurance, and taking account of all the other factors and the totality of the circumstances of this case, public policy does not demand that the claim not be met.
5.       Judgement for the plaintiff in the agreed sum of $519,500.

EVIDENCE - ADDUCING EVIDENCE - DOCUMENTS - OTHER MATTERS
Observations as to the meaning and operation of section 34C of the Evidence Act in relation to audio recordings. For the purposes of section 34C a document can include an audio recording.
Insurance Contracts Act 1984 (Cth) s 56; Criminal Law Consolidation Act 1935 s 13A; Live Insurance Act 1995 s 228; Acts Interpretation Act 1915 s 4; Evidence Act 1929 s 34C, referred to.
Briginshaw v Briginshaw (1938) 60 CLR 336; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; Transport Industries Pty Ltd v Longmuir [1997] 1 VR 125; Murray’s Transport v CGU Insurance (2013) 118 SASR 11; McLennan v Insurance Australia Ltd (2014) 286 FLR 453; FAI General Insurance Co Ltd (In Liq) v Sherry and Ors [2002] SASCFC 431; Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513; Beresford v Royal Insurance Co Ltd [1938] AC 586; Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147; Beresford v Royal Insurance Co Ltd [1937] 2 All ER 243; Fender v St. John-Mildmay [1937] 3 All ER 402; St. John Shipping Corporation v J. Rank Ltd [1956] 3 All ER 683; Hardy v Motor Insurers' Bureau [1964] 2 All ER 742; Ramsay v Trustees Executors & Agency Co Ltd (1948) 77 CLR 321; Graham v Colonial Mutual Life Assurance Society Ltd (No 2) [2014] FCA 717; Delaney v Pickett [2011] EWCA Civ 1532; Joyce v O’Brien [2013] EWCA Civ 546; McCracken v Smith [2015] EWCA Civ 380; Miller v Miller [2011] HCA 9; Jackson v Harrison (1978) 138 CLR 438; Smith v Jenkins (1970) 119 CLR 397; Gala v Preston (1991) 172 CLR 243, considered.

AUSTRALIAN EXECUTOR TRUSTEE LTD v SUNCORP LIFE & SUPERANNUATION LTD
[2016] SADC 89
Introduction

The 17^th of March 2008 was a hot day in the town of Renmark. At around 11.45am a loud explosion was heard near number 6 Namoi Street. Moments later Ann Marie Humby was seen backing out of its driveway. Shortly after she drove away, the house was consumed and destroyed by fire. Her husband Anthony Bruce Humby was found dead in the house, his body charred beyond recognition.
Investigations showed that flammable liquid had been poured over the floor and the fire had then been ignited. Subsequent investigations showed that Mr and Mrs Humby were under financial pressure, and that the bank were in the process of foreclosing the mortgage on number 6 Namoi Street and repossessing the house.
Mrs Humby made a property insurance claim. She withdrew it after investigators told her they thought the fire had been deliberately lit, and were not accepting her version of events. She then made a claim pursuant to Mr Humby’s life insurance policy (“the Policy”). The Policy insured Mr Humby’s life for $500,000 with Mrs Humby the nominated beneficiary.
Mrs Humby died of an asthma attack a year later.
The trustees of Mrs Humby’s estate have pursued the life insurance claim over Mr Humby’s death. The life insurer has refused to pay. They say they don’t have to pay because Mr and Mrs Humby set the fire that caused Mr Humby’s death, that Mrs Humby then fraudulently claimed on the Policy not disclosing that fact, and also that it is against public policy that a person who caused the loss by conspiring to commit a wrongful act should be able to benefit by claiming the insurance that insured against that loss.[1]
[1] This is only a brief summary of the pleadings and the matters asserted by the defendant, whereas the court has had regard to the pleadings in their totality and all matters pled therein.
Mrs Humby’s will leaves her estate to her children.[2] Both their parents are now dead. They played no part in the destruction of the house.
[2] Tendered at tab 4 of tender book 1.
The life insurance policy
It is common ground that at the time of Mr Humby’s death the defendant was responsible for a current life insurance policy over Mr Humby’s life. It had been initially taken out in 2006 in the sum of $500,000 and at the time of death, with indexation, was worth $519,500. Mrs Humby was the sole nominated beneficiary. It is not in dispute that absent the allegation that Mr and Mrs Humby set the fire that caused Mr Humby’s death, Mrs Humby and her estate would be entitled to claim and receive the benefit of the Policy.[3]
[3] Per Statement of Claim and the Fourth Defence.
The issues in the case
It is not in dispute that the fire was deliberately lit by someone.[4] It is not in dispute that Mr Humby was killed in the fire, and that the life insurance policy was in force at the time of death.
[4] Para 4A of the plaintiff’s Second Reply to the Third Defence.
All the evidence suggests that Mr Humby, who was inside the house alone at the time of the explosion and fire, at a time where accelerant had been spread over a significant part of the floor, was involved in an attempt to deliberately set the fire. Whilst it was faintly argued that he may have been attempting suicide, it is far more likely that the accelerant was accidently ignited before Mr Humby had time to leave the premises. It is not in dispute that the Humbys were under great financial pressure and the bank were in the process of repossessing the house. It is likely that the fire was for the purpose of addressing the family’s financial woes by claiming on the house and contents insurance.
It is however disputed that Mrs Humby was involved in any scheme to set the fire, and accordingly the defendant maintains she is entitled to claim under the life insurance policy. The plaintiff also claims that even if Mrs Humby was involved in a scheme to burn the house down for the property insurance, she ought still be able to claim on the life insurance as the death was an unintended consequence of the scheme, and that there is no evidence of any intention to cause Mr Humby’s death to claim on the life insurance.[5]
[5] Paras 4-5.2.3 of the Second reply to the Third Defence.
Hence the primary factual dispute is whether Mrs Humby was involved in any scheme to burn the house down.
The primary legal dispute is whether, in light of whatever factual finding is made as to her involvement in the fire, her estate can claim on her husband’s life insurance.
The court has had close regard to the evidence given by the witnesses and close regard to all the other evidence tendered by both parties. For brevity it will not all be set out or referred to, however it has all been closely considered. The court is indebted to counsel for their clear and comprehensive written and oral submissions, which have also been closely considered, but which for brevity will also not be replicated.
Where insurance fraud by way of arson is alleged by a defendant insurer, it is for the defendant to establish these matters on the balance of probabilities, mindful of the seriousness of such an allegation.[6]
[6] Briginshaw v Briginshaw (1938) 60 CLR 336, Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, Transport Industries Pty Ltd v Longmuir [1997] 1 VR 125, Murray’s Transport v CGU Insurance (2013) 118 SASR 11, McLennan v Insurance Australia Ltd (2014) 286 FLR 453.
In the absence of direct evidence, this requires a careful application of the settled principles applicable to proof by circumstantial evidence. They are well known and require no repetition.
Primary factual dispute – was Mrs Humby involved in causing the fire that killed Mr Humby
By way of background, Mr and Mrs Humby had owned and lived at the property in question for a number of years. At the time of the fire, they lived there with four of their five children. Both Mr and Mrs Humby are deceased and direct evidence from them was consequently unavailable. A number of interviews and statements by Mrs Humby taken in the period between the fire and her death just over a year later were tendered. The children residing at the house were aged between 4 and 16. None were identified as being present at the time of the fire. None were called to give evidence. A statement from one of them was tendered.
The defendant called two neighbours who witnessed events surrounding the fire, together with a number of witnesses involved in the investigation of the fire. As the neighbours’ evidence is very relevant to whether Mrs Humby was present at the outbreak of the fire, I set out its essence.
Dino Ceracchi gave evidence that he and his wife Frances lived diagonally across the road from Mr and Mrs Humby’s house, perhaps 50 to 70 metres away. At about 11.40am on the 17^th of March 2008 he and his wife were at home, and a decision was made that his wife would drive into town to get some take away food. Shortly after she left the house he heard an explosion so he went outside and saw thick smoke and flames coming from the direction of the Humby house, and moments later he saw that the Humby house was fully ablaze. He panicked and rang his wife as he momentarily forgot the emergency number, then he rang 000 for help.[7]
[7] T161 et seq, plus a tendered statement which can be located at tab 49 of tender book 3.
Frances Ceracchi gave evidence, confirming that she and her husband Dino lived about 50-60 metres from the Humbys’ house. When the decision was taken to get some take away food she walked out of the house to her car, initially going to the passenger side to check whether her keys were in the car. They were, so she closed the passenger door and walked around the front of the car. As she was half way round the car she heard a loud bang. She paused and looked in the direction of the bang, but could not see over the fence. The sound came from the direction of the Humbys’ house. She therefore continued around the car, opened the driver’s side door and got into the car. She turned on the ignition and commenced reversing down her driveway towards the road. As she proceeded she saw Mrs Humby reversing her car out of the Humbys’ drive, so she gave way to her. In a statement given to police at the time,[8] Ms Ceracchi estimated that it was about 20-30 seconds between the time she heard the loud bang and the moment she saw Mrs Humby reversing out of her drive. In that time Ms Ceracchi had been able to walk around her car, get in it, start it, and reverse out of her driveway to the point where she observed Ms Humby doing the same.
[8] Tendered at tab 40 of tender book 3.
Ms Ceracchi was played an audio interview she gave to an investigator about these events and having refreshed her memory from that said that the time between standing at the front of her car hearing the noise and seeing Ms Humby backing out of her driveway was between 20 and 25 seconds.[9]
[9] T185.
The defendant also sought to tender prior audio recordings of Mrs Ceracchi, pursuant to section 34C of the Evidence Act 1929. These were statements given to an investigator not long after the events. They contain a little more detail as to the events and in relation to times in particular. The plaintiff objected to the tender of the audio on the basis that audio is not a “statement” within the meaning of the section.
Section 34C renders admissible any “statement made by a person in a document” tending to establish a relevant and admissible fact, on production of the original document so long as the maker of the statement has personal knowledge of the matters dealt with by the statement, and the maker of the statement is called as a witness in the proceedings.
The issue is whether an audio recording is a “document”. Section 34G defines document for the purposes of section 34C as “includes books, maps, plans, drawings and photographs”. The use of the word “includes” makes it plain that the definition is non exhaustive.
Section 4 of the Acts Interpretation Act (SA) provides that in that and every other Act, unless the contrary intention appears, “document” includes amongst other things “any article or material from which sounds, images or writings are capable of being reproduced with or without the aid of any other article or device”. That definition plainly includes audio recordings.
The issue is accordingly whether section 34C of the Evidence Act displays a contrary intention, to the effect that audio recordings not be regarded as documents for the purposes of that section.
In my view, the primary aim of the section is to facilitate proof by way of the admission of previous documented expressions of evidence by witnesses who will be called to give evidence anyway, subject to the establishment of relevance[10], provenance[11] and the witness being available for cross examination on the statement.[12] That is likely to be for several reasons, not the least of which are the efficient facilitation of proof of matters by way of tender rather than drawn out oral evidence, and the admission of statements made (sometimes much) nearer the event in issue which consequently may be more accurate or reliable.
[10] 34C(1).
[11] 34C(4).
[12] 34C(1)(b).
In light of that obvious statutory intention and in all the circumstances, in my view section 34C allows the tender of audio recordings so long as all the section is otherwise complied with. Accordingly the challenged recordings are admitted.[13]
[13] MFI D8 will now become D8.
Mr and Ms Ceracchi were both very good witnesses. The court has had regard to everything raised with them in cross-examination, argued in submissions, and has reviewed their evidence against all the other evidence and material tendered in the trial. They gave their evidence in a clear and straightforward way, it was consistent within itself and with each other, consistent with the forensic evidence tendered at trial, and the court has no hesitation in accepting the evidence each gave as honest, objective and reliable.
The other two witnesses called were Detective Brevet Sergeant Holmes (“Detective Holmes”) the police senior officer who initially attended and investigated the fire, and Brevet Sergeant Bosley (“Sergeant Bosley”) a police officer from the Forensic Response Section who investigated the cause of the fire and prepared reports for the Coroner’s Office and for the purposes of this trial.
Detective Holmes arrived at the scene of the fire at about 12.45pm. At that time uniformed police, SA Ambulance, fire units and various other people were already there. It was a very hot day, 38 degrees at that time, rising to 42 later in the afternoon. The house at 6 Namoi Street is in a semi-rural location on the outskirts of Renmark North.
He spoke with Mrs Humby at various times in the course of the day, commencing at about 1.25pm. Those conversations were videoed and have been transcribed and tendered.[14] The court has regard to everything Mrs Humby said. She commenced by stating that she and Mr Humby had taken things out of the house to do a spring clean, and that she had gone to Target to get some shoes and check the mail whereupon her son had rung her to say the house was on fire, but that when she had left the house she had seen nothing, that her next door neighbour left just after her “…but I saw nothing heard nothing”.
[14] See volume 1 of tender book 1.
Police asked her what she thought had happened and she replied “I don’t know you tell me I don’t know”. She said her husband had had back pain and had not been well but was in a reasonably good mood. When asked by police if he would have committed suicide she said she didn’t think he would be that stupid. Police asked what she went into town for and this time she said that she was going to “Party Boys”[15] to ask if her friend Helen who worked there wanted her to mind the shop the next day and see what was happening about an arrangement whereby her son was to go to Adelaide with Helen with two vehicles to pick up her brother.[16]
[15] A shop.
[16] Tender book volume 1, p59-63.
At that point police located a charred body in the remains of the house, and told Mrs Humby that Mr Humby had been found dead in the house. She became distraught and started to cry. When she was able to continue she told police he had seemed alright and OK when she left him in the lounge room, he saying he may go for a walk.
She said she had backed her car out normally. When asked if she heard a bang as she drove out the driveway Mrs Humby said “… No, no I heard nothing, had my radio on, I heard nothing.” She said when she heard the news she went to the toilet at Helen’s shop, spoke to a lady, then drove straight back to the house. She kept repeating to police that she saw and heard nothing, for example “…I didn’t hear anything, I turned the radio on got out turned my air conditioner on my car just backed out and just took off normally. Not take any notice because you’re always hearing bangs around the place even from the tote bins …. But nup I didn’t hear anything.”
When Detective Holmes asked whether she had rung anyone on her phone that morning she said:
"ANo a policeman from Berri rang me and said he wanted to talk to … he’s going to be working back on day shift cos he’s planning on going back to work he’s going to ring work and plan on going back to work day shift. I said well I wasn’t sure shift (sic) to catch up with him later in the week, I said catch him this afternoon.”

Then the police asked to check Mrs Humby’s phone and said they would be investigating the matter, and Mrs Humby said she understood that meant investigating her; then the following exchange occurred:
Q.Okay, if there’s anything that you can help us out with for Christ’s sake.
A.If I knew he was gonna do this I wouldn’t a went into town. (sic)
Q.Yeah.
A.I would not went (sic) into town.
Q.Okay, alright.
A.If he was gonna do that, I wouldn’t went (sic) into town there’s no way in hell I would have went into town.
Q.Okay.
A.There’s no way in hell.
Q. No I’m not, hey Anne Marie no one’s blaming you for it okay, did you have a fight just before you went?
A.No, no.
Q.Okay.
A.We had sex last night.
Mrs Humby in answer to further questions went on to say that she saw her neighbour drive off when she drove off, and that she got on well with the neighbours. She said she last saw Mr Humby when she said goodbye to him from the front door as he was standing inside the house, then she walked straight to her car, jumped in, turned it and the radio on and reversed out with the air-conditioner on also. She repeated she heard no bang, curiously adding “not to my recollection”. She said that when she had been notified about a fire and was talking to a woman from the police station, the policewoman asked if her husband was with her and Mrs Humby replied “I think he went out for a walk”.
Detective Holmes said that while he was speaking to Mrs Humby in the police vehicle from about 1.20pm onwards, he could not smell any accelerant.[17]
[17] T85.
At about 8.20pm that evening Detective Holmes attended the house where Mrs Humby was, to further interview her and seize her clothes. The clothes had been washed seemingly at the suggestion of the occupant of the house.[18] She told police the last time she had seen her husband he had been in the sunroom, complaining about his back, and saying he might go for a walk. She said he had been in a good mood. In response to further questions she described how he had been feeling and presenting over previous periods, including having back pain that day and in recent times, statements he had made at various times as to whether he might kill himself, and various medical issues. In the course of that discussion Mrs Humby said it had taken her about 10 seconds to walk from the house to her car, get in and turn it on, then a couple of seconds to reverse out. In answer to questions on the topic of insurance, she said that the house and contents were insured and that there was also a life insurance policy over Mr Humby.
[18] T87.
Police subsequently searched the shed and found a significant amount of valuable and personal property, including a PlayStation wheel, numerous DVDs, photos, school reports and certificates for the children and other property. Some of this is shown variously in the photos and video tendered.
Police investigations revealed that Mrs Humby had purchased new shoes at Target at 11.55am on the day of the fire, and had immediately discarded the shoes she had been wearing in a bin. Three days after the fire police raised this with Mrs Humby, to which she replied “You’re going to look for them, aren’t you”, and half an hour later when police were in fact retrieving shoes from the bin in question, they noticed Mrs Humby observing them from a distance from a phone box. Investigations revealed she had made an unrelated call from that phone box.[19]
[19] T90-93.
Police formally interviewed Mrs Humby on 1 April 2008. That is a lengthy interview and the court has had regard to all of it. Mrs Humby described the family and its background in detail, and her husband and his situation in detail. She said he had had on and off depression over time, and several medical conditions. He had recently had a cancer scare, and although a colonoscopy had revealed there was nothing serious there, he had not been completely convinced. She said there was about $55,000 owing on their ANZ mortgage at the time of the last statement.[20] She admitted that they had financial difficulties, saying that with a worst case scenario that they could have lost their home but she had been trying to prevent that by applying to and receiving superannuation monies through APRA and AMP, which they had received but had not yet applied to the mortgage.[21] She said that they had lent their lawn mower to friends but were yet to get it back.[22] She was taken through the events of the day of the fire in great detail.
[20] Tender book volume 2 page 185.
[21] Tender book volume 2 page 205-206.
[22] Tender book volume 2 page 206-207. The issue of the lawnmower, and the purchase of fuel for it by Mrs Humby is relevant to the possible sources of accelerant used to start the fire.
Mrs Humby was asked about the spring clean she had said they were undertaking, and she described how they removed items from the house, such as “all the kids’ toys and things that are going to get damaged” and put them in the shed. She said they were going to be “taking everything out, sweep everything out, wash the floors, put everything back”. That included all the beds and furniture in the house, to the point that the house would have been empty. [23] They were going to do it as Mr Humby was “in a good, fit, good mood and he wanted while he was fit, feeling better he wanted to do it.” She said they took everything out of the house at least once a year for that purpose.
[23] Tender book volume 2 page 213-216.
Then when asked about work, Mrs Humby said that Mr Humby had been off work from his job at Angove’s and had been complaining that day of back pain.[24]
[24] Tender book volume 2 page 220.
A little later she told Detective Holmes that Mr Humby always used to bring fuel cans and gas bottles inside the house, including jerry cans, although they were normally kept in the shed. She said she had filled up a can as they were going to mow the lawn. When police asked from where, she replied “probably” from the Ral Ral store, then on further questioning said how she had purchased petrol from there on Friday.[25]
[25] Tender book volume 2 page 238-240 etc.
She said all their valuable documents such as mail, wills and birth certificates could have been moved out and into the shed by taking the drawers they were in out to the shed.[26] She repeated how long it took her to get into her car and drive out of the driveway, then said she drove to Target which would take her 10 minutes, but on the way she got the phone call from the Police officer as he wanted Mr Humby to be a witness to something. She was asked what she said to him and she replied:
AI just said he wasn’t available, he’s thinking about going back to work wasn’t (sic) sure. And I was going to get him to give him a call back later. I said call back later in the day, but he said he’ll call back later in the day again. In a couple of days or whatever. Cos Tony didn’t want to be a witness, but he had no guts to tell anyone anything. Always let me do the dirty work.[27]
[26] Tender book volume 2 page 248-249.
[27] Tender book volume 2 page 252.
Mrs Humby said that her husband was definitely not at work that day, or scheduled to go back the next day.
She said that she had thrown away her shoes on the day of the fire as they were not comfortable enough, and she needed something comfortable as she was working the next day. Her old shoes had a strap at the back that fell underneath the shoe and would catch every time she was driving. She had had them for two years. She purchased $7 thongs for cash. She said she then drove towards the shops but she saw her phone ring and it was from Helen at Party Boys, and she went there, whereupon her son Timmy ran out of the shop to say her house was on fire, and Helen told her the same and she spoke to a female police officer on the phone. She said she told that officer her husband “may have went for a walk. I hoped he went for a walk.”[28] At that Mrs Humby went to the toilet, then drove home.
[28] Tender book volume 2 page 258.
She was asked again about the jerry can of fuel she said she had bought on the Friday, and she replied she last saw the can on the veranda and that she had not seen any cans of fuel inside the house when she had left. She said she had no idea how the fire had started or what had happened, repeating that she had no idea what had happened or how the fire started.[29] When police told her the cause of the fire was petrol doused around the house, she said Mr Humby must have done something stupid like smoke around fuel, saying he “could have been” smoking when she left.[30] Police produced the footwear they had retrieved from the bin and Mrs Humby said that at first she had thought they might not have been her shoes, but she then agreed that they were her size 8 thongs.[31]
[29] Tender book volume 2 page 264.
[30] Tender book volume 2 page 266.
[31] Tender book volume 2 page 273.
Later that day the police resumed questioning Mrs Humby. She appeared to become inconsistent as to what she told the police officer who had rung on the morning of the fire, saying she told him that her husband wasn’t available, that he might end up on day shift or the afternoon shift, and she told the police officer that as she was sick of having to answer questions for Mr Humby when he should be doing it. [32]
[32] Tender book volume 2 page 280.
During the interview on 1^st April 2008 Detective Holmes then asked why Mrs Humby had failed to mention on the day of the fire, when he had been asking her about their financial situation and whether they had financial difficulties and their house, that they had been served with a notice from the Supreme Court foreclosing on their premises just 5 days earlier on the 12^th of March. She replied “Forgot all about it. Forgot all about it.”[33] She admitted that while she had told police that they were spring cleaning, she had told the media they had been planning to renovate.[34] She did not disagree with Detective Holmes’ allegation that nearly every item of worth, all their financial documents, wills, insurance documents, every DVD, pictures of their children, children’s belongings and personal belongings had been taken out of the house.[35]
[33] Tender book volume 2 page 281-282.
[34] Tender book volume 2 page 283.
[35] Tender book volume 2 page 284-288.
After first saying that she was trying to resolve the foreclosure although she knew “eventually it might happen”, she then agreed they had been served with Supreme Court foreclosure papers and had not attended, and knew that the likely consequence of non-attendance was losing the house.[36]
[36] Tender book volume 2 page 288-290.
Detective Holmes then put to Mrs Humby that she told the police officer who rang her at the time of the fire that Mr Humby “was at work”, and that he was on day shift. Mrs Humby’s answers can only be described as jumbled, confused and evasive.[37] She agreed that when she spoke on the phone to the policewoman re the fire she had told her Mr Humby had gone for a walk.[38] She agreed again it would have taken her about 12 seconds to leave the house and reverse her car in the driveway.[39] As Detective Holmes displayed increasing scepticism, Mrs Humby appeared to accept that her husband was responsible for the fire, but continued to deny her own involvement. While she maintained she did not hear the initial explosion, as one point she curiously also said “I might remember it in time”.[40] Police investigations had revealed that Mrs Humby had purchased the petrol on the Sunday, the day before the fire, not the Friday she had previously claimed. She maintained it was on the Friday.[41]
[37] Tender book volume 2 page 291-295.
[38] Tender book volume 2 page 294.
[39] Tender book volume 2 page 300.
[40] Tender book volume 2 page 304.
[41] Tender book volume 2 pages 311-314.
The police then spoke to Timothy Humby, the oldest child residing at the house. He was 17 at the time of the interview. He said that while his father was out of work, his mood was alright.[42] He was asked about the cleaning up process whereby everything was taken out of the house, and he told police it was done once a month.[43] He agreed “all sorts of stuff” had been moved into the shed, including CD’s, DVD’s, his PlayStation and his Peter Brock picture.[44] He said that it was odd that they had moved all his things out without him being around. He said they did a full clean every month.[45]
[42] Tender book volume 2 page 327.
[43] Tender book volume 2 pages 332, 337 and 349.
[44] Tender book volume 2 page 344.
[45] Tender book volume 2 page 349.
The defendant called Sergeant Bosley, a crime scene examiner with expertise in the investigation of fires.
Sergeant Bosley had conducted a detailed investigation into the origin and cause of the fire that destroyed the house in question. I am satisfied he was qualified as an expert to express the opinion evidence that was provided.
Sergeant Bosley concluded that accelerant had been spread over a significant part of the lounge room from the front door through and into the adjacent bedroom 1. The circumstances pointed to an initial vapour explosion, subsequent to which the fire took hold initially where the accelerant was located on the floor. Mr Humby’s body was found on the other side of bedroom 1. An empty fuel type can was located several metres from Mr Humby’s body, although it was possible it had been moved in the course of the firefighting efforts.
Sergeant Bosley expressed the opinion that the fire had been deliberately lit, with the use of accelerant that had been poured around the house, and that a vapour explosion occurred at the start of the fire, and that explosion likely knocked over and possibly knocked out Mr Humby where he was standing in bedroom 1.[46]
[46] Exhibit D9, and T193-218.
Evidence was called by way of statement from Senior Constable First Class Wright. That officer had been investigating an unrelated theft from a Renmark business. Mr Humby was apparently a potential witness in that matter. He phoned Mrs Humby at 11.45am on the day of the fire, which was almost exactly the time the fire started. He told Mrs Humby he had rung on the landline but there had been no answer, and wanted to catch up with Mr Humby for the purposes of obtaining a statement from him. Mrs Humby replied that he was at work, as he was on dayshift for a couple of days, after which he would be on afternoon shift. The officer noted this in writing at the time of the conversation, and entered the details into the computer investigation dairy.[47] The significance of this evidence is that Mr Humby was not at work at that moment, in fact was not working on that day or at the time, but was inside the house. If Senior Constable First Class Wright’s evidence is true, then Mrs Humby was lying to him about Mr Humby’s whereabouts and activities at the time. The officer was not required for cross examination, and there is no reason not to accept his evidence.
[47] Tender book volume 1 pages 163-164.
Evidence was called by way of statement from Margaret Gene Lawrie, Mrs Humby’s sister.[48] She said that she had been so disgusted with their living conditions at the house, that since 2000, 8 years prior to the fire, she had never been back to the Humbys’ house. She said that the place looked like a dump. The significance of this evidence is how it contrasted to Mrs Humby and her son’s statements to Police as to how they would so often assiduously and completely clean the house. It is apposite to observe that Mrs Humby and her son’s statements differed as to that, Mrs Humby saying the total clean involving the removal of all furniture and items of value was annual, whereas the son seemed to be saying it was at least monthly. Mrs Lawrie was the person who washed Mrs Humby’s clothes on the evening of the fire. She said she was “pretty sure I offered to wash her clothes for her as she had nothing else to wear.”
[48] Tender book volume 3 page 413. Inadmissible parts of the statement were redacted by consent.
She said that when the police took the clothes, Mrs Humby told her that “she knew they wouldn’t find anything on the clothes but she was worried for some reason that there might have been a transfer of stuff from other people who had been hugging her.”
Evidence as to the Humbys’ dire financial situation was called. In the course of her interviews with police and a private investigator, Mrs Humby progressively admitted the dire financial situation. A statement from an APRA officer Gerard Leo Cronin was provided together with a bundle of documents. APRA regulates superannuation in Australia and may authorise the early release of superannuation funds in certain circumstances.
The material revealed that each of the Humbys applied for the early release of some or all of their modest superannuation holdings on compassionate grounds, for the expressed purpose of preventing the mortgagee sale of their house by ANZ. Mrs Humby applied on 30 July 2007, and Mr Humby on 17 October 2007.
As part of the APRA process the Humbys were required to document their financial circumstances. That material establishes that at the time of the applications they had numerous overdue debts, were substantially behind on their mortgage payments, and had been informed by the ANZ on 18 July 2007 that the bank proposed to exercise their power of sale over the Humbys’ house. The material shows that the Humbys tried to stave off the bank by negotiating with them about their APRA applications, however by 12 February 2008 the bank wrote per their solicitors that in light of the required payments not having been made, proceedings had been instituted in the Supreme Court to take possession of the property. They were each personally served with that application on 14 February 2008, notifying them of a hearing on 12 March 2008 seeking possession of their house.
By that time each of the Humbys had received the Superannuation monies they had applied for, but rather than applying them to the mortgage, had applied them to living expenses and other debts.[49] Possible inferences arising from this evidence might be that they either decided to prioritise other more minor debts over the imminent loss of their house, or that the Humbys had other plans as to how they were going to deal with the bank debt and the possible loss of their house.
[49] Tender book volume 3 pages 573-578.
Evidence was called establishing that the house and contents were insured for a total of $154,000, which would have been sufficient to fully repay the ANZ. When questioned on the day of the fire and subsequently, Mrs Humby knew these figures almost exactly.
Over ensuing weeks and months, Mrs Humby made a claim on the home and contents insurance. Her claim was vigorously investigated by the house and contents insurer, who by way of their investigator eventually put to Mrs Humby that in his view her husband had burnt the house down for the insurance money, that the claim would be denied, and alluded to further police involvement. At that, Mrs Humby withdrew her claim pursuant to the house and contents policy. Having closely examined those materials, particularly in light of the way the investigator treated Mrs Humby, involving palpable scepticism together with veiled threats of further police involvement, the court cannot regard the withdrawal of the property claim in itself as any evidence that Mrs Humby was necessarily involved in the burning down of the house.
The circumstantial evidence is overwhelming that Mr Humby was involved in a plan to burn down the house. The central pieces of such evidence are that firstly, he was adjacent to a large area of floor over which accelerant had been spread at the time of the fire, no-one else was in the house, and the family had intractable financial difficulties which meant the loss of the family home was imminent. Available other monies had not been applied to the debt. All the family valuables and irreplaceable items had been removed from the house and placed in the shed. It is unlikely that he was intending to commit suicide. Self-immolation is an uncommon, unlikely and extremely traumatic mode of doing so, and it is extremely unlikely he would have done it virtually in front of his wife. There is no real evidence that he had that intention, and in the final analysis of all the evidence it is far more likely that Mr Humby was killed by way of the accelerant being prematurely accidentally ignited prior to Mr Humby leaving the building.

The court finds that Mr Humby was involved in a plan to burn the house down for the property and contents insurance, but was accidentally killed when the accelerant prematurely ignited, exploded and killed him.
The circumstantial evidence also strongly supports Mrs Humby’s involvement in the plan to burn down the house.
In addition to the matters just referred to, Mrs Humby purchased about 5 litres of petrol shortly before the day of the fire. The motor mower she claimed this was for was on loan and had not been returned. Her claims about the massive spring clean she and her husband were in the course of undertaking were inconsistent with her son’s statement as to regularity, and inconsistent with her sister’s perceptions as to how they lived. Her statements to police and the investigator were in the final analysis inconsistent and evasive over time. For example, she initially gave two quite different reasons to police for having left the house on the morning concerned. There are numerous other examples of her inconsistent statements, another being that when she was adverting to the possibility of suicide she said that Mr Humby was off work suffering back pain and discomfort, but when at another stage trying to convey that they were indeed spring cleaning said that they decided to do so because Mr Humby was feeling fit and well.
Mrs Humby’s statement to Senior Constable First Class Wright at the very moment the fire would have been igniting that Mr Humby was unavailable as he was at work was plainly untrue, and is consistent with her wanting to place her husband somewhere else at the time she was aware he was starting or had started the fire in the house. The evidence of her neighbours establishes that at the time of the initial explosion, which explosion was sufficiently loud that they heard it from both inside and outside their house some distance away, Mrs Humby had not yet got in or started her car, and was adjacent the house. In light of that, Mrs Humby must have lied to police and the investigator that she had not heard it. Further, hearing an explosion coming from her own house, yet still getting in her car and driving away is, in all the surrounding circumstances, only consistent with a knowledge of and involvement in the cause of the explosion.
Conclusion as to Mrs Humby’s involvement in the fire
The court finds that Mrs Humby was involved with Mr Humby in the plan to burn the house down for the property and contents insurance. She did not however intend nor did she consider that Mr Humby might or would be killed in the course of that endeavour.
In light of Mrs Humby’s involvement in the plan to burn the house down for the property and contents insurance, by which Mr Humby was accidentally killed, can her estate claim Mr Humby’s life insurance
It is not in dispute that Mr Humby’s life was insured, and that he died. It is also not in dispute that Mrs Humby was the sole beneficiary and that her estate may now legally maintain the claim.
The defendant resists the life insurance claim on the basis that Mr Humby intended to set fire to his house in order to make a fraudulent claim on the home and contents insurance policies, and maintains that the life insurance claim is even less tenable if, as indeed has now been proven, Mrs Humby was involved in the plan.[50]
[50] Defendants closing written submissions at paragraph 79.
The defendant pleads that in these circumstances it is not obliged to pay the claim for one or more of the following reasons.
·The claim on the life insurance policy was made fraudulently within the meaning of the Insurance Contracts Act 1984 (Cth),
·Mr and Mrs Humby breached an implied term in the life insurance policy that each party to it would act towards each other with the utmost good faith,
·That it would be against public policy that the beneficiary of the life insurance policy who caused or conspired to cause the loss by wrongful means should be able to rely on the policy to recover the benefit, or where the subject loss was a direct consequence of the fraudulent or otherwise wrongful conduct of the life insured.
The life insurance claim
Mrs Humby signed a “Death Claim application Form” on 24 April 2008, which was received by the defendant on 30 April 2008.[51] The form required, and Mrs Humby provided, details as to the policy, particulars concerning the deceased’s identity and dates of birth and death, and a number of formal matters. She was required to, and did, provide an authority for the defendant to obtain information concerning the matter from a wide range of third parties. There was no request or requirement to provide information as to the cause of death or any other information as to the circumstances surrounding it. She was not informed of any further duty of disclosure, nor was there any requirement to provide any other information.
[51] Tender book volume 2 page 374.
There is no inaccurate, untrue or misleading information in the death claim submitted by Mrs Humby to the insurer.
Terms of the life insurance policy
The Policy provided a death benefit, as follows:
5.1 Death Benefit
If you die while covered under this policy, we will pay the sum insured for Term Life cover, less any payments we have made for;
·terminal illness
·total and permanent disablement where the schedule states ‘single payout applies’; or
·Funeral Advancement benefit.
The Policy contained a limitation as to when a death benefit might otherwise be payable;
7.1 When we will not pay a death benefit
We will not pay a benefit on death if death is caused directly or indirectly by an intentional self-inflicted act, within 13 months of;
·the commencement date;
·an increase to the sum insured (in respect of the increased portion only); or
·the most recent reinstatement of the policy.
There were terms relating to the making of claims;
9.1 General
Unless otherwise stated, the claim conditions outlined in this policy document must be satisfied and liability admitted by us before any payments under the policy can be paid. Payment benefits under the policy will only be considered upon;
·Our claim requirements being met by the Policy Owner, and
·Relevant legislative requirements being adhered to.
Clause 9.2 required written advice of a claim and 9.3 required the person claiming to complete the insurer’s claim form. Clause 9.4 set out the circumstances wherein claims would be paid;
9.4 Claim requirements
Payments under this policy will be made if;
(a)we have received the following requirements (in a form that is satisfactory to us);
·properly completed claim form(s);
·the original policy document and schedule;
·proof of the event or condition for which the claim is being made and when it occurred;
·proof of age (unless previously provided);
………. (and)
(b) We have admitted liability.
Certain terms were also defined;
10 Commonly used words or expressions
……………….
accidental death means death solely and directly caused by injury
……………….
injurymeans physical damage to your body caused solely and directly by an accident which occurs while cover for the applicable benefit was in force under this policy.
Relevant statutory provisions
It is common ground that at all relevant times it was not a criminal offence to commit suicide in the State of South Australia.[52] Further, the Life Insurance Act (Cwlth) 1995 provides that an insurer may only avoid liability in the case of suicide if the policy expressly excludes liability in the case of suicide.[53] The Insurance Contracts Act (Cwlth) 1984 provides that an insurer may refuse payment of a fraudulent claim;
[52] Criminal Law Consolidation Act 1935, s 13A
[53] Life Insurance Act 1995, s 228.
56 Fraudulent claims
(1)Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.
(2)In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non‑payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.
(3)In exercising the power conferred by subsection (2), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.
Was the claim made fraudulently within the meaning of the Insurance Contracts Act 1984?
Mrs Humby and her husband were intending to ignite the house for the purposes of a fraudulent home and contents claim. Mr Humby’s role was likely to have been to stay and ignite the accelerant upon departure, likely fully intending to leave the house before he was harmed, and likely subsequently planning to claim, as Mrs Humby initially did, that he was out walking when it occurred.
The plan was likely jointly conceived, with Mrs Humby’s role to assist Mr Humby with the preparations such as moving property out and by purchasing the petrol.
The accelerant ignited accidently and prematurely, causing an instant vapour explosion and Mr Humby was killed by the explosion or the immediately subsequent inferno. That was not part of the plan or meant to happen. Nor was it envisaged that it might happen.
As such Mr Humby’s death was an accident in every sense of that word. It was also not part of any fraudulent plan related to the defendant life insurer.
As earlier mentioned, in her notification of claim to the life insurer Mrs Humby provided the insurer with all the information requested by way of their pro-forma, including the date of death and a number of other requested particulars. The form did not require her to state the cause of death. She authorized the insurer to obtain any and all other information that they may require from any source. [54] Mrs Humby said nothing in her claim form to the life insurer that was not palpably true.
[54] A cause of death was required by and provided to the home and contents insurer, but not by the life insurer.
Accordingly there was no plan to defraud the life insurer, nor was the death part of any plan to defraud the life insurer, and Mrs Humby did not provide any false or misleading information to the life insurer in pursuit of her claim.
Further, there is nothing in the policy or any of the insurance materials provided to Mrs Humby which would infer or connote to the reader that the policy did not or would not necessarily cover her husband’s death, even in the circumstances that actually did transpire; his accidental death in the course of a plan to do something else, to defraud someone else. Accordingly a failure to provide unrequested information concerning the cause of the fire which accidentally resulted in death does not in these circumstances necessarily connote an intention on the part of the claimant to mislead by omission a life insurer who has not indicated either by way of the policy wording or the claim form that such information would be relevant to their willingness to pay the claim.
In the totality of all those circumstances I conclude that the life insurance claim made by Mrs Humby and now pursued by her estate was not made fraudulently within the meaning of the Insurance Contracts Act.
Did Mr and Mrs Humby breach an implied term in the life insurance policy that each party to it would act towards each other with the utmost good faith?
This question may be answered in brief terms.
In light of the primary factual findings made, the court must also conclude that at no stage prior to Mr Humby’s death did he intend or contemplate that he would be killed or that a claim would be made under his life insurance policy concerning his actions up to and including his time of death.
In those circumstances it cannot be said that at any stage of his life he breached any duty he owed to the life insurer. To put the proposition in the plainest of terms, he owed the life insurer no duty to disclose that he was planning to burn his house down and make an unrelated property damage claim to another party who happened to insure his house.
Mrs Humby was not a party to Mr Humby’s life insurance policy, so the terms of the policy, including any implied term of utmost good faith did not bind her.
Is it against public policy that Mrs Humby, being the beneficiary of the life insurance policy who caused or conspired to cause the loss by wrongful means should be able to rely on the policy to recover the benefit, or where the subject loss was a direct consequence of the fraudulent or otherwise wrongful conduct of the life insured?
This is a question not so easily or briefly answered.
The plaintiff initially submitted that the defendant had abandoned such a defence. The submission was based around the fact that earlier versions of the pleadings raising a public policy defence alleged that the actions of the Humbys amounted to criminal offences. The current version does not specifically allege the commission of criminal offences, but reads as follows:
2.6 Further and in the alternative and in complete answer to the Claim the Defendant says that:
2.6.1it is against public policy that the beneficiary of the Policy who caused or conspired to cause the loss by wrongful means should be able to rely on the Policy to recover the benefit; and
2.6.2the Plaintiff is thereby prevented from recovering for the alleged loss.
2.7Further and in the alternative and in complete answer to the Claim, the Defendant says that:
2.7.1it is against public policy that the beneficiary of the Policy should be able to rely on the Policy to recover the benefit in circumstances where the subject loss was the direct consequence of the fraudulent or otherwise wrongful conduct of the life insured; and
2.7.2the Plaintiff is thereby prevented from recovering for the alleged loss.
Earlier in the Statement of Claim the Defendant squarely pled that the Humbys deliberately hatched a scheme to burn down their house to then maintain a fraudulent home and contents claim against another insurer. As discussed with counsel during the course of trial, read as a whole the defence pleading puts squarely into issue whether public policy ought to allow a claim in circumstances where the Humbys wrongfully burnt the house down in a pursuance of a scheme to defraud the other insurer.
True it is that the new pleading did not go on to say “… and those events also amounted to the criminal offences of conspiracy, arson or attempted fraud”, but the particulars clearly allege all the factual conduct that if proven would amount to those crimes. The plaintiff could not point to any prejudice in the conduct of their case apart from somewhat elliptical references along the lines of “…it can be inferred that the plaintiff has sought and received advice in relation to the matter involving whether or not to go to trial.”[55]
[55] Plaintiff’s outline of submissions, paragraph 91.
In the final analysis, the pleading was perfectly adequate to put the plaintiff on notice of such a defence, and to allow such a defence to be maintained at trial.
Here, the insured’s accidental death was an unintended consequence of the Humbys’ joint scheme to burn the house down for unrelated property insurance. The defendant resists the claim on the basis that in these circumstances public policy is a bar to recovery.
It is trite law that where an insured deliberately performs an unlawful or criminal act for the purpose of themselves claiming insurance they have taken out against the occurrence of that act, the insured may not pursue the claim. That principle will also preclude recovery by a third party claimant beneficiary under a policy of insurance where the claimant is part of the scheme to perform an unlawful or criminal act for the purposes of claiming on the insurance in question. That principle has no application here, as neither the insured nor Mrs Humby deliberately killed Mr Humby nor indeed intended or took any action for the purposes of fraudulently claiming his life insurance.
It is clear that public policy can also in certain circumstances defeat an insurance claim where the event upon which the claim is based has happened while the claimant was engaged in performing an unlawful or criminal act, even though that act was not directed towards causing the insured event or making an insurance claim.
The general principle, together with the primary criteria by which the test is applied and the commonly cited authorities from whence they are drawn were succinctly expressed by the Full Court in FAI General Insurance Co Ltd (In Liq) v Sherry and Ors [2002] SASCFC 431. The Chief Justice said at [80]:
… I am content to adopt the principles stated by the Full Court of the Supreme Court of Victoria in Fire and All Risks Insurance Co Ltd v Powell [1966] VicRp 73; [1966] VR 513. The position is conveniently summarised by O'Bryan and Pape JJ at 521-522, in a passage which came after their consideration of the case law dealing with the maxim ex turpi causa non oritur actio:
"So much for the special application of the maxim ex turpi causa non oritur actio to contracts of insurance against third-party liability. The principles upon which this maxim operates in general are more difficult to state with precision. In what cases does public policy demand that a person shall not be allowed to recover damages or an indemnity or contribution, as the case may be, from another, when the event upon which such claim is based has happened while the claimant is engaged in doing an unlawful or maybe a criminal act? When does public policy demand that the claim shall not be entertained in the courts of justice? It may be that each case is to be decided on its own particular facts. The gravity of the illegal or criminal act in question, the possible tendency to encourage the doing of such acts if civil claims are entertained in respect of them, the necessity for the courts to uphold a deterrence to the doing of such acts, all spring to the mind as relevant considerations. The cases seem to support the view that they are all relevant."
This is a notoriously difficult area of the law.
Bleby J at [133] discussed the approach where the unlawful act is unequivocally criminal, observing that even in that event a balancing exercise is called for:
A question of public policy may arise where the claim involves the commission of a crime by the insured. However, it is not an inflexible rule that liability will be denied in every case which involves commission of a crime. In Fire & All Risks Insurance Co Ltd v Powell (supra) Smith J said, at 527:
"It is to be noted that in Beresford v Royal Insurance Co Ltd [1938] AC 586, the authorities relied upon were cases of murder, of intentional killing constituting manslaughter, and of death by execution for a capital offence. And it may be that in relation to crimes of the gravest sort the rule, in its application, is inflexible, taking no account of the particular circumstances: cf. Cleaver v Mutual Reserve Fund Life Association, [1892] 1 QB 147 at p 152; [1891-4] All ER Rep 335. Outside that field, however, it would seem that the basis on which the rule rests requires that its application should depend upon a weighing, with reference to the public interest, of all the relevant circumstances. And these, I consider, must include the gravity of the class of crime; the offender's knowledge of facts or law making his conduct a crime; the degree of likelihood that if enforcement were allowed the commission of similar crimes would be promoted; the degree of likelihood that enforceability would promote the interests of the victims; and the public interest in the observance of contracts: compare, generally Beresford v Royal Insurance Co Ltd, [1937] 2 KB 197, at pp 219-220; [1937] 2 All ER 243; Fender v St. John-Mildmay, [1938] AC 1, at pp 12-14; [1937] 3 All ER 402; St. John Shipping Corporation v J. Rank Ltd., [1957] 1 QB 267, at p 292; [1956] 3 All ER 683; Hardy v Motor Insurers' Bureau, [1964] 2 QB 745 at pp 768-70; [1964] 2 All ER 742; Ramsay v Trustees Executors & Agency Co Ltd. [1948] HCA 44; (1948) 77 CLR 321; [1949] ALR 105."

Where, as here, the claimant was involved in the unlawful and criminal act which ultimately occasioned the loss, the authorities have approached the issue of the viability of their claim in the following way.
Firstly, for the claim to be defeated on the grounds of public policy there must be a causal connection between the unlawful and criminal act and the injury or loss. Where that injury or loss is foreseeable this condition will be plainly satisfied, but not necessarily so where the injury and loss were not foreseeable.[56] Where the event and the consequent loss is not an intended result of the unlawful and criminal act, in the context of a joint criminal enterprise (as is this case), the causal link has been said to be established where:
The character of the joint criminal enterprise is such that it is foreseeable that a party or parties may be subject to unusual or increased risks of harm as a consequence of the activities of the parties in pursuance of their criminal objectives, and the risk materialises, the injury can properly be said to be caused by the criminal act of the claimant even if it results from the negligent or intentional act of another party to the criminal enterprise.[57]
[56] Graham v Colonial Mutual Life Assurance Society Ltd (No 2) [2014] FCA 717, Delaney v Pickett [2011] EWCA Civ 1532.
[57] Joyce v O’Brien [2013] EWCA Civ 546, McCracken v Smith [2015] EWCA Civ 380.
Secondly, the claimant has to have been an active party to the unlawful and criminal act at the time of the injury or loss.[58]
[58] Miller v Miller [2011] HCA 9, Jackson v Harrison (1978) 138 CLR 438, Smith v Jenkins (1970) 119 CLR 397, Gala v Preston (1991) 172 CLR 243, Joyce v O’Brien [2013] EWCA Civ 546.
Finally, the unlawful and criminal act must be sufficiently serious, non-trivial and morally wrong that the law should not countenance recovery of the damage, loss or claim by the person involved in such an act.[59]
[59] Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513, Beresford v Royal Insurance Co Ltd, [1937] 2 KB 197, FAI General Insurance Co Ltd (In Liq) v Sherry and Ors [2002] SASCFC 431, Delaney v Pickett [2011] EWCA Civ 1532.
Counsel have been unable to cite any case directly similar to the case at bar.
The case of Graham v Colonial Mutual Life Assurance Society Limited (No 2) [2014] FCA 717 however bears some similarity. The deceased died of smoke inhalation and asphyxiation in the course of committing arson by burning his computer and certain business records. His widow claimed pursuant to the deceased’s life insurance policy.
McKerracher J found that the death was as a result of being trapped in the premises after the fire was lit, and was unforeseen, unexpected and unintentional.
The court held that the death was not caused by the arson but by being trapped in the building and killed by the smoke. The court held that a partial suicide exclusion (similar to that contained in the Policy here) comprised “the only exclusion to deliberate death in the Policy”, and that the Policy did evince an intention to deal with accidental death caused by criminal activity by providing as part of a further accidental death option, an exclusion for accidental death caused by criminal activity. So, the judge reasoned, accidental death caused by criminal activity was intended to be covered by the life cover as there was no similar exclusion relating to that cover. Those were factors distinguishing the case, as well as the not insignificant fact that the widow in that case was uninvolved in the arson. The court held that in light of all those facts and circumstances public policy was no bar to the claim.
The claim in this case was initially lodged by Mrs Humby. The legal action to enforce it was taken subsequent to Mrs Humby’s death by her estate, on behalf of the Humbys’ children who are the sole beneficiaries pursuant to her will. They are innocent of any wrongdoing.
The public policy “defence” may however equally be maintained against those who claim through a wrongdoer’s estate, as they are said to “stand in the shoes of the assured”.[60] Whilst accepting that principle, I do not consider however that in considering the totality of the circumstances, the factors of who makes and pursues the claim before the court, and for whom the ultimate benefit of the policy is sought to be secured, and against who the public policy shield is sought to be brandished, should be excluded from the totality of the circumstances to be considered by a court.
[60] Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 at 159, Beresford v Royal Insurance Co Ltd [1937] 2 All ER 243 at 249.
Applying the three stage test articulated above:
Firstly, there was a direct causal connection between the unlawful and criminal act of Mr and Mrs Humby planning to commit arson for the property insurance, and Mr Humby’s death at least in the sense that absent the arson scheme, the accelerant would not have been present to be then accidentally ignited. However Mr Humby’s death was neither intended nor foreseen, but rather was accidentally caused when the accelerant he had poured out ignited prematurely. There was at no stage any plan by either Mr or Mrs Humby that he should die or that they might defraud the life insurer, nor did they foresee or contemplate doing so. The life insurance was not in their contemplation at the time, and was in place to provide security for the family, particularly the children, 4 of whom still lived at the house. The estate commenced the legal action, on behalf of the children.
Secondly, Mrs Humby was indeed an active party to the unlawful and criminal act at the time of the injury or loss.
Finally, the unlawful and criminal act of pursuing a joint scheme to commit arson to defraud a property insurer was a serious, non-trivial and morally wrong act. Pouring petrol over the floor of a house with a view to igniting it for the insurance was a serious crime. The act involved dishonest conduct directed towards financial gain and also presented collateral dangers. There were nearby houses and rural properties and it was a very hot day. There was an obvious risk that the fire would spread beyond the Humbys’ own property.
I turn to consider the matter in terms of the overarching principle expressed originally in Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513, and approved in FAI General Insurance Co Ltd (In Liq) v Sherry and Ors [2002] SASCFC 431, that the court must weigh:
…. with reference to the public interest … all the relevant circumstances. And these … must include the gravity of the class of crime; the offender's knowledge of facts or law making his conduct a crime; the degree of likelihood that if enforcement were allowed the commission of similar crimes would be promoted; the degree of likelihood that enforceability would promote the interests of the victims; and the public interest in the observance of contracts.
The unlawful conduct that the claimant committed was very serious. The crime itself was however neither directed to causing the insured event, being the death of the insured, nor to making a claim on the policy concerned. The conduct in pursuance of the scheme did not directly cause the death, but created the accelerant-soaked environment whereby accidental premature ignition could and indeed did cause the insured event. The death was an accident in every sense of the word.
The risk of Mr Humby’s death was not foreseen by either the deceased or the claimant. The making of the death claim itself was not fraudulent, and did not contain any misleading information concerning the insured event.
Upon the subsequent unrelated death of the claimant, the litigation has then been instituted and the benefit of the policy is now sought by the Humby’s children, who are now without both their parents. They are blameless. They knew nothing about and took no part in the impugned conduct.
If the life insurance claim is allowed, it is very unlikely that the commission of similar crimes would be promoted. For example, I consider it highly unlikely that a person considering whether to burn something to fraudulently claim the insurance on that item, whether it be a house, a car, or some other type of property, would be encouraged to do it by the thought that if it all went wrong and they were accidentally and unintentionally killed, someone would be able to claim on their life insurance policy. That thought is exceedingly unlikely to even cross their mind, let alone form an actual consideration as to whether or not they burn the item for the insurance. Nor are they likely to be deterred from such action by the thought that public policy will prevent someone claiming on their life insurance. The long experience of this court, in both the criminal and civil jurisdiction, is that arsonists do not usually intend or contemplate that their actions will kill them. In particular, where, as here, the crime is committed for the purposes of fraud, it is logical to conclude that the arsonist plans to be around to reap the financial benefit of the consequent fraudulent insurance claim. In this case, to reap the benefit of preventing foreclosure on the property.
Life insurance is also a significant type of insurance, so often providing the means by which families can financially survive the death of an insured. As such, it performs an important role in society, and the observance of such contracts is as a general rule in the public interest. In this case, to bar the claim would mean the Humbys’ innocent surviving children will be denied the insurance benefit to which they would otherwise be entitled.
In assessing whether public policy is a bar to this claim which is otherwise payable pursuant to the policy upon the accidental death of Mr Humby, the court must “weigh all the relevant circumstances”,[61] and decide the case “on its own particular facts”.[62]
[61] Fire and All Risks Insurance Co Ltd [1966] VR 513, per Smith J at 527.
[62] Fire and All Risks Insurance Co Ltd [1966] VR 513, per O’Brien and Pape JJ at 521-522.
Conclusion
This matter is indeed finely balanced.
In the final analysis, whilst the Humbys’ unlawful conduct was serious, in light of the fact that the insured event was an accident which was neither contemplated, intended nor reasonably foreseen, that the claim was not fraudulently made, that the claim relates to life insurance, and taking account of all the other factors mentioned and the totality of the circumstances of this case, public policy does not demand that the claim not be met.
Accordingly there will be judgement for the plaintiff in the agreed sum of $519,500.