Ghamrawi & v GIO General Ltd - [2005] NSWCA 467

NEW SOUTH WALES COURT OF APPEAL

CITATION: Ghamrawi & Anor v GIO General Ltd [2005] NSWCA 467

FILE NUMBER(S):
40214/05

HEARING DATE(S): 16 December 2005

JUDGMENT DATE: 16/12/2005

PARTIES:
Rabia Ghamrawi - First Appellant
Nazzarena Sant - Second Appeallant
GIO General Ltd - Respondent

JUDGMENT OF: Giles JA Ipp JA Brownie AJA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 2057/03

LOWER COURT JUDICIAL OFFICER: Balla DCJ

COUNSEL:
W P Lowe & A D Gibbons - Appellants
C Moschoudis - Respondent

SOLICITORS:
Andresakis & Associates, Parramatta - Appellants
Jones King Lawyers - Respondent

CATCHWORDS:
Insurance - whether prior refusal of claim disclosed when taking out insurance - whether client legal privilege in counsel's advice recording knowledge of prior refusal had been lost - whether erroneous preference for evidence of insurer's practice and computer record over oral evidence of insured - whether error in fact-finding as to receipt of document from insurer - depends on facts. ND

LEGISLATION CITED:

DECISION:
(1) Grant leave to appeal, notice of appeal already filed to stand as the notice of appeal; (2) Appeal dismissed; (3) Appellants pay respondent's costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40214/05
DC 2057/03
GILES JA
IPP JA
BROWNIE AJA
Friday 16 December 2005

GHAMRAWI & ANOR v GIO GENERAL LIMITED

Judgment

GILES JA: Mr and Mrs Ghamrawi owned an investment property at Blacktown. In February 2001 Mrs Ghamrawi took insurance on their behalf with GIO General Ltd (“GIO”). She took it out over the telephone, dealing with Mr Balcombe of GIO.
In May and June 2001 the property was damaged by fire. The Ghamrawis claimed under the insurance. GIO declined to pay on the ground that there had not been disclosed to it that a prior insurance claim by Mr Ghamrawi upon NRMA Insurance Ltd (“NRMA”) had been refused.
The judge found, contrary to Mrs Ghamrawi’s evidence, that the NRMA refusal had not been disclosed to GIO. GIO did not press a case of fraudulent non-disclosure, but her Honour upheld its submissions that it had cancelled the insurance for non-disclosure, pursuant to s 60(1)(b) of the Insurance Contracts Act 1984 (“the Act”), and that its liability was reduced to nil by reason of the non-disclosure, pursuant to s 28(3) of the Act.
The Ghamrawis did not have an appeal as of right, leave to appeal being required if the amount at stake was less than $100,000 (Supreme Court Act, 1970, s 101(2)(r)). No affidavit stating facts showing that this restriction did not apply was filed (Supreme Court Rules Pt 51 r 8), and counsel for the Ghamrawis was unable to demonstrate from the appeal papers that more than $100,000 was at stake. GIO did not apply to have the appeal struck out as incompetent. There was regrettable failure to appreciate the leave requirement. Application for leave to appeal was made orally; in my opinion the appeal should be dismissed, and I am prepared to grant leave to appeal without further exploration of the occasion for doing so.
Cancellation of the insurance was a false issue. By a letter dated 7 August 2001 GIO cancelled it as at 22 August 2001. Cancellation is for the future only, and did not affect any existing obligation to provide indemnity following the damage by fire: Sutton, Insurance Law in Australia, 3rd ed, para 7.36; Derrington and Ashton, The Law of Liability Insurance, 2nd ed, para 2-222; Kennedy v NZI Insurance Australia Ltd (Robin QC DCJ, QDC, 16 April 1992, unreported).
The Ghamwaris contended on appeal that -
(a)the judge was in error in admitting into evidence a barrister’s advice dated 13 October 2000 (“the advice”);
(b)the judge was in error in finding that Mrs Ghamrawi had not disclosed the NRMA refusal –
(i) because of the error in admitting the advice; or
(ii) in any event; and
(c)the judge was in error in finding that the Ghamrawis had been informed of their duty of disclosure as required by the Act.
Admission of the advice
The advice was tendered in GIO’s case, after all oral evidence had been taken. The Ghamrawis objected on the grounds that it was not relevant and that they had the benefit of client legal privilege. The judge regarded it as relevant because it went to the knowledge of Mrs Ghamrawi of the NRMA refusal. She held that there had been an entitlement to client legal privilege, that it had not been lost by knowing and voluntary disclosure within s 122(2) of the Evidence Act 1995, but that the Ghamrawis had asserted inconsistent knowledge and had thereby impliedly consented to the adducing of the evidence within s 122(1).
In para 2 of its defence GIO alleged non-disclosure in that “the matters particularised below” were known to the Ghamrawis and were not disclosed to it. The particulars were –
“The Plaintiff’s [sic] full prior insurance claim history was not disclosed to the Defendant and in particular a declined claim by NRMA Insurance Ltd on 6 December 1999. Attached hereto and marked ‘A’ is correspondence from NRMA Insurance Ltd to the Plaintiff [sic] regarding Claim No. PLDCR99/04982.”
The attachment as a letter from NRMA to Mr Ghamrawi dated 6 December 1999. It referred to a claim lodged for the theft of his car, and informed him that it had been decided to refuse the claim and -
“The decision has taken because information which we obtained during the investigation of your claim led us to conclude that it was not genuine and that theft of your car did not occur in the way in which you have stated or at all.
We do not believe you have told us the truth regarding the circumstances giving rise to the claim. Consequently we consider that number 1 under the heading ‘We may refuse a claim if you’ on page 22 of your Comprehensive Insurance Policy booklet applies to your claim. This states:
‘We may refuse a claim, or cancel this policy, or do both, if you are not truthful and frank in any statement you make in a claim or in connection with a claim.’
We enclose a copy of the statement you made to us dated 2 November 1999.
This decision has also been taken because while investigating your claim we became aware that when you applied for your Comprehensive Insurance Policy you did not tell us certain information relating to your traffic history. At the same time you misrepresented information relating to your traffic history.
Your failure to tell us this information and your misrepresentation of information affected our decision to issue a Comprehensive Insurance Policy. We consider your failure to tell us the information to be a breach of your duty of disclosure and in view of the breach and in view of your representation of information we hereby avoid your Comprehensive Insurance Policy from the time it first commenced.”
Mrs Ghamrawi gave evidence that, when she telephoned to take out the insurance, she was asked “if I had any previously declined claims”. She said that she answered that her husband had a previously declined claim “which we’re currently going through NRMA with”, and that the person to whom she spoke said that “house and car were two different policies” and “they didn’t require that information”. She was shown a copy of the NRMA letter of 6 December 1999, which she identified as its refusal, and was asked -
“Q. What happened to your husband’s car?
A. It was stolen.
Q. What reason did they give for declining your claim?
A. Traffic --
Q. No I’m asking, do you remember what reason was given in relation to --
A. Originally it was that – my husband’s traffic history.”
In cross-examination it was put to Mrs Ghamrawi that the conversation as she related it had not occurred, and that she had not disclosed the NRMA refusal. She maintained her evidence.
The cross-examiner then put to her that she and her husband had had a conference with a barrister about the claim on NRMA, with which she agreed. He put that the conference had been on 5 October 2000; she said she could not remember. The cross-examination continued -
“”Q. Now, you gave some evidence before that originally the claim from NRMA was declined because of a non-disclosure of a traffic record on your husband, is that right?
A. Did I what, sorry?
Q. The NRMA claim was originally declined because of a non-disclosure or an alleged non-disclosure of a traffic history, is that right?
A. That’s correct.
Q. But then that changed, I want to suggest to you, and in fact, there became an issued of alleged fraud in relation to the stealing of the motor vehicle?
A. That’s correct.
Q. In fact, what was alleged was that the motor vehicle was not actually stolen but there was some fraud in relation to that and those allegations came about because of some ---
HER HONOUR: Can you ask one question?
CAMPBELL: I’m sorry hour Honour. Can I ask one question at a time, your Honour?
HER HONOUR. Yes.
CAMPBELL: Yes.
Q. The fraud allegations arose out of some mobile phone history, is that the case, do you know that or not?
A. I’m not too sure.
Q. As I understand the previous ---
A. I know that there was mobile phone issues but I wasn’t aware of why the fraud allegations came into it. I can’t really remember.
Q. In any event, both yourself and your husband, sat down and spoke about these issues with a barrister on 5 October 2000. Do you accept that>
A. I’m not too sure of the dates, I’m sorry it was a while ago.
Q. When you spoke to the GIO representative over the telephone about the Court proceedings, did you tell him that there was allegations of fraud in relation to those court proceedings?
A. No.”
Counsel for the Ghamrawis did not object to this cross-examination. In re-examination Mrs Ghamrawi was asked -
“Q. Do you remember, I think my friend asked you questions in regard to fraud being raised in the NRMA case?
A. Yes.
Q. Do you remember when that new allegation was raised, do you have any memory as to when?
A. It was at the – I think it was asked – it was put in when we were nearly about to go to court and our barrister had asked for them to lodge a document to say why we had been declined or something.
Q. Do you remember the dates when you went to court?
A. No I don’t.
Q. Do you remember what year?
A. It was last year.
Q. 2003?
A. Yes.
Q. So at the time back when you rang up about the insurance for the house, were you aware about any allegations of … (not transcribable) …
A. No.”
Counsel for the Ghamrawis accepted that the part of the question which was not transcribed was that Mrs Ghamwari was not aware of any allegations of fraud in the NRMA case.
It is plain enough, and as will be seen was accepted when the advice was tendered, that GIO had a copy of the advice and the cross-examination was founded upon it. There was no evidence of the circumstances in which GIO obtained a copy of the advice, but the judge was informed by counsel.
When the advice was tendered by GIO, in the course of submissions on the question of privilege counsel for the Ghamrawis said -
“LUCKMAN: The fact of the matter is that it’s advice from the barrister and he’s relaying things that were said in conference. This surely is a privileged document. It was handed over, my friend hasn’t put that to you, but it was handed over willingly by the plaintiff but what I’m putting to you is that isn’t sufficient to waive privilege and there’s clear authority on that. It was handed over carelessly.
HER HONOUR: You were here weren’t you?
LUCKMAN: Sorry? No your Honour, I had no knowledge of the document at all. I was caught by surprise at the time. The evidence was put to the client after the client said the first possible knowledge that she had was in 2003 and he raised a barrister’s advice. This document was .. (not transcribable) .. inadvertently because my client’s, as they’ve done all the way through, when the investigator came out to investigate the fire, gave them everything they possibly had and we’re not taking any chances being told they didn’t disclose everything so they gave them the whole file that they had. The [sic] hadn’t received at that stage any legal advice on whether this document should be handed over or not, it was pure inadvertence and carelessness and the authorities clearly state in my respectful submission that carelessness doesn’t waiver privilege.”
The submissions of counsel for GIO included -
“CAMPBELL: … I don’t make any submissions in relation about why the plaintiff gave – it’s not a contest that she gave it to an investigator …
in this particular case what we’ve got is a loss of privilege because of the disclosure of the contents of the document to the GIO in this case for whatever reasons. In my submission, it don’t know [sic] what authorities my friend has in relation to that, it was willingly given for the ---
HER HONOUR: You say it was voluntarily ---
CAMPBELL: Yes.
HER HONOUR: --- and knowingly disclosed. … “
In these passages the transcript reversed the representation; I have corrected counsel’s identification.
In her reasons the judge said that the advice showed that on 5 October 2000 the Ghamrawis attended a conference to discuss a possible claim against NRMA, and that -
“ … at that conference they discussed NRMA’s assertion that the vehicle had not been stolen in the manner alleged by the first plaintiff. The NRMA had relied on firstly Mr Ghamrawi’s financial position and secondly a discrepancy between his mobile phone records, which showed that he was in a moving car at the time, he was supposed to be shopping at Merrylands.
They also discussed the NRMA’s reliance on Mr Ghamrawi having provided an inaccurate traffic record. Mr Ghamrawi told the barrister that he had left an expired licence in his brother’s car, which had been stolen and used by others.”
The advice used the blunt description that NRMA had refused the claim on the basis it was a “fraudulent claim”, while stating that “fraudulent” in that context was not confined to actual fraud. It was said that, depending on some further information, Mr Ghamrawi might or might not be advised to bring proceedings against NRMA.
The Ghamwaris submitted that the advice was not relevant “because counsel’s advice on issues which may or may not arise in anticipated court proceedings is not a matter which requires disclosure as part of the insured’s duty of disclosure”. They said that counsel’s advice was given on facts yet to be established and that in the result NRMA settled the proceedings brought against it. This missed the point. The relevance of the advice lay in the Ghamrawis’ knowledge of the NRMA refusal. GIO particularised non-disclosure by reference to the letter of 6 December 1999. It was relevant to establish that the Ghamrawis knew as at February 2001 the reasons for the NRMA refusal as given in the letter. Mr Ghamwari must have known them through receipt of the letter, and the reasons included fraud although not using that word; they included that the car had not been stolen as stated or at all and that Mr Ghamwari had not told NRMA the truth. Mr Ghamwari’s knowledge may have been enough, see Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1989) 166 CLR 606, but GIO was entitled to seek to establish that Mrs Ghamwari also knew the reasons through what had been said at the conference on 5 October 2000. No doubt that is why counsel for the Ghamwaris did not object to the cross-examination on the ground of relevance, but rather addressed Mrs Ghamwari’s state of knowledge in re-examination.
In my opinion, client legal privilege was lost when the advice was provided by the Ghamrawis to the investigator. While the judge had no evidence, she was informed by counsel in a manner showing that she was entitled to act upon what they told her. Counsel for the Ghamrawis said that the advice had been handed over willingly and that the Ghamrawis gave the investigator everything and were “not taking any chances being told they didn’t disclose anything so they gave him the whole file that they had”. While counsel asserted mistake, that does not sit easily with what he told the judge; the intention as asserted by counsel must have been to give the investigator, amongst the documents in the file, the advice, and I do not accept that in that situation it had to be shown that the Ghamrawis knew that they could claim privilege (cf Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 at 402).
Inadvertent provision of a document, for example by mistake in an accelerated discovery process, can leave the privilege intact if it can effectively be reinstated (see Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538; Kabwand v National Australia Bank (1987) 81 ALR 721). But here there was no basis for finding mistake as to providing the advice, and it had been in the possession of GIO and used without objection to found the cross-examination. In my opinion, there was knowing and voluntary disclosure within s 122(2).
This is not the basis on which the judge admitted the advice, and I respectfully differ from her Honour in this respect. It is not necessary to consider whether she was correct in the basis on which she held the advice was admissible, and I should not be taken to agree with it. In the result, the advice was correctly admitted.
The Ghamwaris submitted also that the advice should not have been admitted “by due consideration of the application of the principles in Browne v Dunn (1893) 6 R 67”. They said that nothing was put to any witness “in regard to receiving, reading or being aware of the contents of” the advice. This misconceives the principles for which Browne v Dunn stands. It was made clear enough in the cross-examination of Mrs Ghamwari that GIO contended that fraud was discussed at the conference on 5 October 1999. Counsel for the Ghamrawis saw fit to take up in re-examination that fraud had not been raised until later. There was no infringement of the principles when GIO sought to prove that occurrence by tendering the advice.
Disclosure
I have referred to Mrs Ghamrawi’s evidence of disclosing the NRMA refusal. Her father gave evidence that he heard her end of the telephone conversation with GIO, that he had kept telling her to make sure that she told GIO about the car, and that he heard her tell whoever she was speaking to “that we had a claim rejected by NRMA”. He said that she told him afterwards that “they said the car does not matter with the house” and “it doesn’t affect the house insurance”. He was cross-examined to the effect that he had but a vague memory and that Mrs Ghamrawi had not in fact told GIO of the NRMA refusal.
Mr Balcombe had no independent recollection of the conversation. He gave evidence of his training and his practice, and there was evidence from Mr Balcombe and another witness that following the prompts in the computerised system would have required entry of a “Yes” answer in relation to previously declined claims. The relevant computer record contained the answer “No”.
The judge said -
“There is then a conflict in the evidence as to firstly any disclosure made by Mrs Ghamrawi and secondly whether she had been read the duty of disclosure during the telephone conversation with the defendant.
On the one hand, Mr Ghamrawi said that she had told the defendant that the claim had been declined and was the subject of Court proceedings. This is only supported in part by the evidence of her father who could not recall whether court proceedings had been mentioned.
On the other hand, Mr Balcombe, who does not recall his conversation with the plaintiff, says that, in accordance with his usual practice, if she had told him there were court proceedings he would not have simply ignored the information and proceeded to issue the policy.
The evidence of both Mr Khoury and Mr Balcombe disclose that the defendant treated any declined claims seriously.
The fact that I have not accepted the plaintiff’s evidence in relation to her understanding of the reason for the NRMA’s refusal to pay the motor vehicle claim does not necessarily mean that she is not to be believed in relation to her evidence of the conversation with Mr Balcombe.
However, I am satisfied that her readiness to give false evidence in relation to significant issue in these proceedings impacts markedly on her credit in relation to the balance of her evidence.
For that reason I prefer the evidence of Mr Balcombe as to his usual practice to the oral evidence of Mrs Ghamrawi.
I accordingly find that the plaintiff did not inform Mr Balcombe of the claim which had been declined by the NRMA Insurance during her telephone conversation and that she was read the duty of disclosure.”

The “readiness to give false evidence” referred back to her Honour’s earlier statement that she did not accept Mrs Ghamrawi’s evidence as to her belief in February 2001 “as to the reason/s for the NRMA having declined to pay her husband’s motor vehicle claim”. This was Mrs Ghamrawi’s evidence in re-examination that she first became aware that NRMA alleged fraud in 2003. The judge did not accept it first, because she found that the letter of 6 December 1999 was known to Mrs Ghamrawi about the time it was sent, and secondly, because the advice showed that Mrs Ghamrawi was told that NRMA refused the claim as a fraudulent claim in October 2000.
Even if the advice had been wrongly admitted, the judge was entitled to conclude that Mrs Ghamrawi had knowledge of the contents of the letter of 6 December 1999, which alleged fraud although not using that word. Once admitted, the advice was also part of the evidence on which the judge could found her conclusion. Mrs Ghamrawi’s evidence was to the effect that as at February 2001 the basis for the NRMA refusal was her husband’s failure to disclose a traffic history, and that any question of fraud did not arise until 2003. It was, of course, possible that she was mistaken in her recollection, although that is not easy to accept given the terms of the letter of 6 December 1999; NRMA’s refusal would ordinarily lodge in the memory. I do not think there was any error in the judge’s path to resolving the issue before her by preferring the practice-based evidence of Mr Balcombe, supported as it was by the content of the computer record, to the evidence of Mrs Ghamrawi.
The Ghamrawis’ submissions included that the judge erred in finding that they were sent a new business notice. Although primarily material to informing them of the duty of disclosure as required by the Act, this was said also to go to the judge’s acceptance of Mr Balcombe’s evidence of his practice, because it was submitted that Mr Balcombe’s evidence concerning such a document was incorrect and reflected upon his credibility.
Mr Balcombe said that when a new policy was “done” a “new business notice was sent out to the customer”. He said that “the policy” was sent to the insured “advising them of the details what’s insured and also states that – also says that you’ve there’s been no accidents claims and it goes through those examples”. He was shown the certificate of insurance later sent to the Ghamrawis , after correction of an address, and was asked where it spoke of previous declined claims; it did not do so. He said that it was “not the original policy that would have sent out as a new business”, and that it was the “original policy, as soon as its been accepted, gets sent out, which has those details on it”.
The original document was no longer held by the Ghamrawis. GIO did not keep a replica of it. It was submitted that because Mr Balcombe gave evidence that GIO did not keep a copy of the document, because the underwriting guidelines did not refer to it, and because Mr Evans who also gave evidence for GIO did not refer to a new business document, Mr Balcombe should not be accepted about a new business document with “those details on it”; and that his evidence generally was therefore not to be accepted.
There was no reason to doubt Mr Balcombe’s evidence in this respect unless it was otherwise established that the document first sent out, as distinct from the corrected certificate of insurance, did not have the details on it. The Ghamrawis referred in that respect to the evidence of Mr Evans. Mr Evans did in fact refer to a new business document, saying that the first certificate of insurance “went out as a new business document” and was the new business document. Asked about correction of an address, he agreed that “the only difference would be is [sic] that the incorrect would be corrected”. I do not think this equated the document originally sent out with the corrected certificate of insurance, so that if the corrected certificate of insurance said nothing about declined claims (as was the case) the original would also have said nothing. The basis for impugning Mr Balcombe’s evidence was not made out.
Information as to the duty of disclosure
Section 22(1) of the Act required that the insurer should, before a contract of insurance was entered into, “clearly inform the insured in writing of the general nature and effect of the duty of disclosure”. By s 22(3) an insurer who failed to do so could not “exercise a right in respect of a failure to comply with the duty of disclosure unless that failure was fraudulent”. I will assume that reduction of liability to nil under s 28(3) was a right in respect of a failure to comply with the duty of disclosure. However, by s 69 it was sufficient for the information to be given orally if it was not reasonably practicable for it to be given in writing, provided the information was also given in writing within 14 days after the day on which the contract of insurance was entered into.
I have set out the judge’s findings as to the telephone conversation. It included that Mr Balcombe told Mrs Ghamrawi of the duty of disclosure. There is no separate ground for challenging the finding in that respect.
It was not reasonably practicable for GIO to inform the Ghamrawis in writing when the insurance was taken out over the telephone. The judge found that they were informed in writing by the sending of the new business notice -
“4.Counsel for the plaintiff then invited me to find that the New Business notice was not sent within 14 days as required by section 69.
The evidence of Mrs Ghamrawi disclosed that she received an initial notice, which prompted Mr Ghamrawi to contact the defendant to correct an address.
I take into account the oral evidence from the defendant as to its practice in generating and sending a New Business notice immediately after any telephone call resulting in a policy being issued.
I infer that the New Business notice was received by the plaintiffs within that 14 day period.
5.It is the uncontradicted evidence of the defendant that firstly the New Business notice set out the duty of disclosure and secondly the New Business notice was in very similar terms to the later certificate of insurance. That later certificate of insurance incorporates a duty of disclosure notice, which I am satisfied, complies with the Insurance Contracts Act requirements.”
From the computer record, the insurance was taken out on 21 February 2001. Mrs Ghamrawi said that she received an original certificate of insurance with an incorrect address on it, that her husband rang to change the address, and that the corrected certificate of insurance was then issued. The corrected certificate gave a period of insurance from 29 May 2001 until midnight on 21 February 2002. It is evident that the judge inferred that the new business document was sent out in due time to be received by the Ghamrawis within the 14 days. She was entitled to do so, and to accept the evidence that the new business document would be sent immediately after a telephone transaction. The purpose of sending the document lent support to acceptance of the evidence.
The Ghamrawis submitted that the finding that the new business document had been received infringed Browne v Dunn principles, because it had not been put to Mr Ghamrawi that she had received it. There is nothing in this. It was common ground that what Mrs Ghamrawi described as an original certificate of insurance was received by her, although it was no longer held.
The result
It was not in dispute that, if the NRMA refusal had been disclosed, GIO would not have entered into the contract of insurance and its liability was reduced to nil. In my opinion, no ground has been shown for disturbing the outcome before the judge.
I propose the orders -
1.Grant leave to appeal, the notice of appeal already filed to stand as the notice of appeal.
2.Dismiss the appeal.
3.Appellants pay respondent’s costs.
IPP JA: I agree with Giles JA.
BROWNIE AJA: I agree with Giles JA.
*****

LAST UPDATED: 16/12/2005