Khatchmanian, Sargis v Mutual Community General Insurance
[2012] VCC 2000
•31 July 2012
| Not restricted | |
| IN THE COUNTY COURT OF VICTORIA | Revised |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-11-01971
| SARGIS KHATCHMANIAN | Plaintiff |
| v | |
| MUTUAL COMMUNITY GENERAL INSURANCE PTY LTD (ACN 007 895 543) | Defendant |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 January, 1, 2, 3, 6, 7, 8 & 9 February; 4, 5, 6, 7, 8, 12 & 13 June 2012 | |
DATE OF JUDGMENT | 31 July 2012 | |
CASE MAY BE CITED AS: | Khatchmanian, Sargis v Mutual Community General Insurance | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 2000 | |
REASONS FOR JUDGMENT
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Catchwords: action on insurance policy – house fire – defence that claim fraudulently made because the plaintiff lit or connived at the lighting of the fire – alternative defence that termite damage should be excluded by reason of exclusion clause – defences fail- judgment for the plaintiff
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr John Searle | Belleli King & Associates |
| For the Defendant | Mr Andrew Donald | Mason Black Lawyers |
HER HONOUR:
1 The plaintiff claims to be entitled to indemnity, pursuant to a policy of insurance effected with the defendant, in respect of a fire which led to the destruction of his house at 9 Bittern Drive, Endeavour Hills, on 27 March 2010.
2 The defendant has refused to pay the plaintiff’s claim and has relied on two defences:
a) that the claim is fraudulently made because the plaintiff lit the fire or connived at the lighting of the fire, such that the defendant has a right to refuse the claim pursuant to the policy and/or s56 of the Insurance Contracts Act 1984 (the Act);
b) that it was a term of the policy that any cover provided would be subject to the exclusion that the defendant would not cover any loss or damage as a result of or caused by insects (termites).
3 The defendant has also counterclaimed for amounts totalling $23,455.00 which it had already paid to the plaintiff, and which it now says should not have been paid by reason of the fraudulent claim.
4 In an earlier ruling[1], I determined that there was no case to answer in respect of a defence based on an alleged breach of the plaintiff’s obligations of disclosure, in failing to advise that the house was subject to insect termite infestation.
[1] [2012] VSC 26
5 The defendant accepted that it bears the onus of proof in respect of each of these defences.
6 The parties were also able to agree as to the quantum of the plaintiff’s claim should he succeed, as $525,162.50.[2]
[2] Agreed Figures for Quantum document dated 1 February 2012.
7 The plaintiff further accepted that in the event the defendant succeeded on the arson defence the plaintiff would fail, and would be required to pay the defendant the sum of $23,455.00 on the counterclaim.
8 The defendant accepted that if it failed on its defences the counterclaim should be dismissed.
9 The issues in the case were, therefore, whether the defendant had established its two defences.
Principles
10 In assessing this case, it is important to refer to the standard of proof which operates. This is a civil proceeding, and the civil standard, namely, the balance of probabilities, applies. The plaintiff submitted that I should also be guided by the principles in Briginshaw[3], which suggest that I would only be entitled to be satisfied, on the balance of probabilities, should I be satisfied that the proofs adduced are cogent.[4] In any event, pursuant to s140(2)(c) of the Evidence Act 2008, I am to take into account a number of matters, including the gravity of the matters alleged.
[3]Briginshaw v Briginshaw (1938) 60 CLR 336, 350 (Rich J), 362-3 (Dixon J).
[4] Oakley and anor v Insurance Manufacturers of Australia Pty Ltd [2008] VSC 68 at [12] (Kaye J) citing Briginshaw v Briginshaw (1938) 60 CLR 336, 350 (Rich J), 362-3 (Dixon J); Rejfek and anor v McElroy and anor (1965) 112 CLR 517, 521.
11 The defendant’s case on the first defence is basically circumstantial. However, inferences are not drawn by considering each individual fact in isolation. On the contrary, it is the united and combined force of several facts acting together, which may, in an appropriate case, give rise to an inference on the balance of probabilities.[5]
Defence 1: “Arson” Defence
[5] Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 128 and 141
Undisputed Matters
12 In considering the first defence, there were a number of undisputed matters which may be summarised as follows:
· the fire occurred at a house owned by the plaintiff at 9 Bittern Drive Endeavour Hills;
· the house is a well screened brick veneer house in a quiet residential street;
· the fire occurred at approximately 11.00 pm on a Saturday night on 27 March 2010;
· there were no occupants in the house at the time of arrival of the CFA;
· there was no known enemy of the Khatchmanians identified on the evidence who may have set fire to the home;
· there was no clear “conniver” identified on the evidence; and
· there was no evidence linking the plaintiff to the actual lighting of the fire, such as, for example, by the purchase of the accelerant used.
13 It should also be noted that, whilst a motive based on termite infestation was originally pleaded by the defendant, this aspect of the defence was not ultimately pursued.
14 In terms of the deliberate lighting of the fire, the defendant called a Mr Barnes, a forensic scientist. He holds a range of qualifications, including a fellowship diploma in secondary metallurgy, as well as being a chartered engineer and chemist. For approximately 40 years he has had experience in investigating all types of fires, including being the principal investigator for the Victorian police following the Russell Street and Turkish Consulate bombings in 1986, and also the principal investigator in the Coode Island fires. He has also investigated over one thousand small house fires since becoming an independent consultant in 1995.
15 He produced a report dated 9 November 2010 wherein he opined that the fire was caused by the spread and ignition of a quantity of flammable liquid on the floor of the front entry and Lounge room.[6]
[6]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 7.
16 Under examination-in-chief, Mr Barnes also opined that the burn patterns he found were “distinctive and absolutely consistent with the speed and ignition of a flammable liquid.”
17 This evidence was also consistent with the evidence of a Ms Noble, an arson chemist employed as a fire investigator by the Victorian police, who gave evidence of what she found when she attended the property on 28 March, 2010.
18 Ms Noble took some toilet rolls from the laundry for sampling, which testing detected moderately evaporated petrol.
19 In the light of this evidence, it was conceded by the plaintiff that the evidence called by the defendant supports a finding that the fire was deliberately lit. This was a proper concession to make in my view.
20 The defendant also called Detective Senior Constable Polson, who was stationed at Narre Warren in the Casey Crime Investigation Unit, and since 1998 had been a police officer involved in investigating fires. During this time he had investigated a very significant number of house fires.
21 His evidence will be referred to, further, below. However, he gave evidence that when he looked at the house at 10.00 am on Sunday 28 March, he saw no evidence of belongings and possessions having been removed before the fire. He also gave evidence that when he saw the plaintiff within a few days of the fire he was very distressed by what had happened to his house.
22 Neither of these matters were the subject of any dispute.
23 However, the plaintiff denied any involvement in the fire and gave evidence that he was in Golden Beach at the time the fire occurred.
24 In the light of this evidence a number of matters arose for consideration, including:
· whether the plaintiff was a credible, reliable witness;
· whether I should find, consistent with certain evidence of Mr Barnes, that there was no forced entry to the home;
· whether the plaintiff had a “powerful financial motive” to cause the lighting of the fire, as suggested by the defendant; and
· the likelihood as to whether the fire was caused by a fire bug/ arsonist.
Plaintiff’s Evidence
25 The plaintiff gave evidence and was extensively cross-examined over the course of some 3 days with the use of an Armenian interpreter. Although there were difficulties with some of his evidence, Mr Khatchmanian generally presented in a straightforward manner, and appeared to evince genuine emotion about the loss of his family home.
26 The plaintiff was born in Armenia on 2 October 1964 where he went to school until year 8, prior to being trained in making calculators for computers, and later engaging in military service and factory work.
27 He came to Australia from Armenia in 1991 when he was 27 years old and started working at a factory in 1992, later known as “Nature’s Gifts”, a pet food company, where he has continued to work as a factory manager.
28 He described a close-knit family with his mother and sister. His mother, Marouisa, was on her own after divorcing the plaintiff’s father when he was about 3 or 4 years old. His sister, Araksya, was a single mother with 2 girls. The plaintiff gave evidence that he sent money to both his mother and sister in Armenia prior to their arrival in Australia, given life was very hard in that country. He also later sponsored both of them to Australia. This was generally corroborated by his mother and sister, who also gave evidence at the trial.
29 The plaintiff purchased the Bittern Drive property for $98,000 in early 2000, where he lived with his mother after the breakdown of his first marriage. He said this marriage broke down because of the absence of children. Later his second wife, Lilit, who also came from Armenia, lived with him there. The couple have two children together, both girls aged 5 and 4.
30 In 2001 the plaintiff purchased some land in Golden Beach. He paid $5000 using a credit card for this purchase.
31 In 2002 the plaintiff’s sister came to live in Australia with her 2 daughters. At this time the plaintiff also purchased another house at 66 Charles Green Avenue, paying $200,000 for it with a bank loan and registering the property in his name. The property was then furnished by him using a GE line of credit in an amount of $14,500. The plaintiff continued to pay the mortgage and other expenses on this house whilst his sister attended English classes in order to gain work. In 2005 this property was transferred into his sister’s name.
32 In terms of the day of the fire, the plaintiff’s evidence was that he travelled to his property in Golden Beach with his wife and children, leaving on Saturday between 10 to 11 in the morning. That prior to leaving, as far as he was aware, the doors were locked and the windows closed. That his wife did the driving, taking the opportunity to stop at a service station for food, before moving on to Golden Beach where they rented a property and stayed for the night. Further, that the family returned to Melbourne the next day after being advised by the police by telephone on the Sunday morning that their house had burnt down.
33 On arrival the plaintiff saw that the whole house was burnt, with “nothing left”. He continued:
“I was 40 years old when I got married, I had two kids, that was – my two kids were born in that house, the house was my first house. All my memories, all my photos, everything belongs – like my daughter’s and memorial stuff. They’re all gone. I wasn’t worried about the furniture and the clothes that burnt, but all those memories, memorial things worried me.”
34 The family subsequently slept at his sister’s house with four of them sleeping in the one room for some two months. His wife and children now live in a unit in Noble Park while he lives with his sister.
35 He denied deliberately causing a fire at his house.
Criticisms of the plaintiff’s evidence
36 The defendant made various criticisms of the plaintiff’s evidence. In particular, it was suggested:
· that the plaintiff “systematically lied” in relation to his tax returns;
· that the plaintiff falsely stated in his interview with an investigator, Ms Webb, that he only had two sets of house keys; and
· that despite asserting that he had a close family he sought to distance himself from financial arrangements, by replying “no, not mine, definitely”, when asked whether it was his idea that his younger niece apply for the Centrelink carer’s pension in relation to his mother.
37 Although the plaintiff answered questions about his tax returns without objection, his evidence on this aspect was unsatisfactory. For example, many of his claims for phone expenses and car expenses in his tax returns during 2008-2011 appear unjustified, given that he was provided with a work phone and, from June 2009, a company car. He was unable to provide an acceptable explanation for some of these claims and, despite suggesting that he would call his accountant and employer to explain some of the claims, he did not do so. This suggests that their evidence would not have assisted him.
38 In relation to the keys, it is true that when he was asked in his interview with the investigator in September 2010 if anyone else had a set of keys to his house, other than himself and his wife, he said “no”. He said that he and his wife took their keys to Golden Beach, which meant there were no keys left in Melbourne.
39 By way of contrast, under cross-examination when asked specifically if any other person had a key to his premises, he volunteered that his mother had formerly had a key, but that when she moved out in 2008 she gave them to him. Further that, although they took two sets of keys with them to Golden Beach, this third set remained in his car in the garage in Melbourne with other spare keys for his mother and sister.
40 There is, therefore, an inconsistency in the plaintiff’s evidence. However, it is not improbable that the plaintiff may have forgotten about another set of keys which had been given to his mother under the stress of an interview. His oral evidence also appeared to be credible since it was not in the plaintiff’s interests to volunteer information about a third set of keys.
41 I therefore accept his evidence that there were a third set of keys in Melbourne, but that they were in his car in the garage with other spare keys for the family. The plaintiff’s Counsel suggested that the garage was locked, and did not suggest that the third set of keys were used to gain entry and start the fire. Although this was not completely clear on the evidence, the evidence of both the plaintiff and his wife was that the house was totally secured prior to their departure.
42 Counsel for the defendant, however, suggested that the existence of the third set of keys was consistent with a non-forced entry. He submitted that the plaintiff may well have said to his “conniver” that this third set of keys were in the garage which was not in fact locked or, alternatively, he may well have handed the keys to such a person and was lying about leaving them in the garage. However, the first suggestion was not put to the plaintiff and was speculation, at best, while, for reasons already given, I found the plaintiff’s evidence as to the location of these keys to be generally believable.
43 Overall, then, the evidence as to the third set of keys did not assist either party.
44 In terms of the plaintiff’s evidence about the carer’s pension, he was asked whose idea it was for an application to be made that his niece apply for such a pension in order to care for her grandmother. He replied that “it wasn’t mine”. It was only when he was pressed a second time that he said “not mine definitely”. Although I accept that he was generally responsible for financial affairs, this is not necessarily inconsistent with the idea for the carer’s pension coming from someone else. I would also add that, having had an opportunity to observe the plaintiff’s mother give evidence, she appeared to be in a significantly frail condition (suffering from diabetes, high blood pressure and a fractured spine), such that it was appropriate for her to have a carer.
45 The plaintiff was not an untainted witness, and indeed had prior convictions in relation to driving, including drink driving. However, consistent with his general directness, he gave evidence of a subsequent disqualification even before it was raised with him.
46 The plaintiff’s evidence about his whereabouts on the day of the fire was also corroborated by a number of pieces of evidence as follows:
· a debit entry appearing in his NAB bank account related to the BP Longwarry Service of 27 March at 12.29pm, consistent with his evidence that the family stopped at a service station on the way to Golden Beach;
· records of the Surf Edge Real Estate which were produced by a real estate agent, Ms Bertolacci, showing a receipt for $100 dated 27 March 2010. Although she had no independent memory of the transaction, she confirmed that her records showed that the property was rented to the plaintiff on 27 March, and that he was “really familiar to her”. She also confirmed that it was not unusual for people to just walk in and book; it did not surprise her that the plaintiff came in and hoped they had something because they did know him;
· records in the NAB account show debit entries for ‘cash out’ payments on 27 March 2010, consistent with his evidence that he paid cash to the real estate agent; and
· telephone records for his mobile number 0414 845 687 show a call from Longford at 6.30 pm (which is some 10kms from Golden Beach) to the plaintiff’s mother’s number, consistent with his evidence that he called his mother on that Saturday night; they also show a call being made from Longford at 10.53am on the Sunday, which was also consistent with the plaintiff’s evidence that he called his sister to ask her to check out his house after receiving the phone call from the police.
47 The evidence of Detective Senior Constable Polson also generally corroborated the plaintiff’s account of critical events. He confirmed the plaintiff’s alibi with the estate agent, and that the drive to Golden Beach is somewhere in the vicinity of four to four and a half hours. He also confirmed that no charges have been brought against the plaintiff.
48 Finally, the evidence of the plaintiff’s family also generally corroborated the events of the weekend, including the call to his mother on the Saturday night and to his sister on the Sunday morning, as well as his general devotion to his family. They, too, appeared genuinely distressed by the loss of the plaintiff’s family home.
Summary
49 The plaintiff gave unsatisfactory evidence in relation to his tax returns. However, his evidence was otherwise generally consistent, plausible and firm, particularly in relation to the critical events of 27 and 28 March 2010.
50 I accept the plaintiff’s evidence as to his whereabouts at the time of the fire, which was supported by objective evidence.
51 This means that the plaintiff had no opportunity to personally light the fire.
52 However, the defendant placed more emphasis on the allegation that the plaintiff had connived at the lighting of the fire. This allegation must therefore be considered in the light of all of the evidence in the case.
Forced Entry
53 The evidence of the plaintiff and his wife was that the doors were locked and the windows secured when they left the house to go to Golden Beach. Further, that there was no damage to the chain mechanism that opened and closed the laundry window, which was described by the plaintiff’s wife as “totally closed and working”.
54 However, the defendant also relied on the evidence of Mr Barnes. He provided a report dated 9 November, 2010, wherein he opined that at the time of the fire all doors and windows were closed and secured, and also that “no evidence of forced entry (prior to the fire), has been detected.”[7]
[7]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 7.
55 Mr Barnes was generally an impressive witness, although he became somewhat defensive when it was suggested that, consistent with the finding of Ms Noble, the seat of the fire was in the laundry. He also did not have an opportunity to attend the property until 3 November, 2010, being approximately 8 months after the date of the fire. As Mr Barnes himself fairly acknowledged the sooner in time after a fire an examination is conducted, the better it is.
56 I accept that Mr Barnes possessed impressive qualifications and experience as earlier set out. However, Ms Noble, the arson chemist employed by Victoria Police, also had a Bachelor of Science and Master of Applied Science and, significantly, had an opportunity to make observations on the morning after the fire.
57 In the light of his impressive qualifications and experience, I have generally accepted Mr Barnes’ opinions that the fire was deliberately lit by the spread and ignition of flammable liquid on the floor of the front entry and lounge – and not from the laundry.
58 However, it remains to consider his opinion as to forced entry in the light of all the evidence before this court – some of which was apparently not available to Mr Barnes at the time he prepared his report.
Doors
59 Mr Barnes opined that the front security door was closed and locked at the time of the fire,[8] explaining in oral evidence that the lock of the security door “was in the locked position” at the time of the fire. He was not able to determine the condition of the internal solid door because it had been completely consumed by the fire.
[8]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 6.
60 He further opined that a detailed examination of the rear porch door revealed that it was both closed and deadlocked at the time of the fire.[9] In oral evidence he pointed to the lack of damage to the locks. However, he accepted that the frame had been damaged, although it was his “understanding” that the back door had been forced by the fire brigade. His view was that the door was intact while the fire was burning as evidenced by the lack of soot or venting around the door.
[9]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 4.
61 Under cross-examination, he conceded “as a generalisation” that it was possible that someone other than the fire brigade forcibly opened the rear door, but that it was his “experience” that the fire brigade would have entered from the back.
62 The evidence of Mr Barnes is consistent with there being forcible damage to the back door of the home. However, his views that the fire brigade were responsible are somewhat speculative in the absence of appropriate evidence from the firefighters concerned.
63 Mr Lia also gave evidence in relation to this matter. He was a Senior Station Officer at the Hallam fire station, who had been employed by the CFA for over 28 years. He received a report of a fire at 9 Bittern Drive at 11.20pm and responded to the call with two firefighters, Matt Kree and David Black. He arrived some five minutes later and found 50% of the house involved in the fire with flames coming out from the front windows, and being “fairly intense”.
64 Mr Lia had little independent memory of the night. He stated that there was a front security door “I believe, which I think was closed….” However, he could not recall going around to the back of the house himself, and received no description from the firefighters as to how they gained entry. His evidence was that he “would have directed someone to go round to the rear and make entry….” to ensure that no-one was home. He also said that he received no report that the back door had been tampered with, though that it was standard procedure to report if there was.
65 Finally, there was the evidence of Detective Senior Constable Polson. When he attended the premises on the following morning he suggested that “the front door of the house had been forced open by the Fire Brigade from discussions I had with the CFA there, to gain access”. Although this evidence appears to be based on a hearsay statement, under cross examination, he agreed that the first thing he “noticed” was that the front door “had been broken down”. This appeared to be a direct observation of a forced entry via the front door which was “confirmed” by the fire officer in charge of the fire operative.
66 The defendant also adduced into evidence a structural report generated by the Fire Investigation Management System. Next to the entry “Forcible Entry-Doors” is the description “Forced by Fire Brigade”, although there is no notation as to whether this was a reference to the front or back door, or both.
67 The evidence as to the doors was unsatisfactory.
68 Mr Lia had little independent memory and the fire report itself is unclear. Although Mr Barnes appeared to opine that the doors were closed and locked at the time of the fire, his own evidence clearly allows for the real possibility of a forced entry via the back door. However, the direct observation of Detective Polson was that there was a forced entry via the front door.
69 The evidence of the two firefighters, Matt Kree and David Black, may well have clarified which, if any door, the CFA had forcibly entered, but they were not called. Both Counsel suggested that the other party should have called them. However, I do not consider that either side might be naturally expected to call these men who were not in the “camp” of one side more than the other.
70 This, however, leaves the evidence in an unsatisfactory state such that a forcible entry via a door (by an unknown arsonist and not the fire brigade) remains a real possibility.
Windows
71 In his report, Mr Barnes opined that the windows were closed and secured at the time of the fire.[10] His reasons for this opinion included an examination of the wind out windows, which were in the “closed position” and also that an examination of the window glass (located external to the windows), revealed the presence of sooting and associated post combustion debris, consistent with the windows being closed at the time of the fire.[11]
[10]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 7.
[11]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 6.
72 Under cross examination, however, he accepted that he could not exclude the possibility that the sooted glass outside had been compromised by the weather (though he did not form that opinion at the time).
73 Mr Barnes also agreed that it would be very difficult to determine whether the frames of the lounge windows were damaged before the fire, given they were severely burnt and almost destroyed. He also conceded that there were small amounts of glass fragments found in the lounge room, such that he could not exclude the possibility of some external force having broken the glass. He accepted, too, that the application of external force was consistent with some sort of a break in, though he suggested that there were a number of other possible explanations with degrees of “likelihood probability”, but did not elaborate further.
74 Mr Lia’s evidence was that he could not give a conclusive opinion as to what position the lounge windows were in before the fire given the damage.
75 Ms Noble also said she was unable to reach any conclusion as to whether the windows had been forced or damaged or broken before the fire because they were too extensively damaged.
76 The evidence of both Mr Lia and Ms Noble allow for the possibility of a break in through the front lounge room given the damage done by the fire. Mr Barnes’ opinion that the windows were closed is based on an examination of window glass some 8 months after the fire, and in circumstances where he could not exclude the possibility of “compromise.” He also conceded that the glass fragments could be consistent with the application of external force, including a break in.
77 In the light of the evidence of these witnesses, a forced entry through the lounge room windows is, at least, a real possibility.
Laundry window
78 In his report, Mr Barnes opined that the laundry window was examined and found to have been closed (and locked) at the time of the fire.[12]
[12]Report of Mr Barnes dated 9 November 2010 (DCB 702-24; exhibit 3) at page 5.
79 Under examination Mr Barnes expanded on his opinion. He found no evidence of significant sooting occurring around the window frame or on the winder, which indicates that the window wasn’t open “to any significant degree at the time of the fire”. He agreed that the laundry window was a “wind out window” attached to the window with a chain, which “pushes out as you wind the handle.” He “didn’t wind it out but as best I could see from that examination I couldn’t see any evidence it was open”.
80 Under cross examination he accepted that there were no locks on any window, including the laundry window.
81 It was suggested to Mr Barnes that Ms Noble’s observation on the Sunday was that the laundry wind-out window was definitely open at the time of the fire, and that there was some damage to the chain attached to the window. However, Mr Barnes, somewhat dismissively, suggested that Ms Noble could not say if it was open or closed at the time of the fire “either absolutely”.
82 He then went on to suggest that it was his experience that the fire brigade will open windows to vent, although there was absolutely no evidence of this occurring in this case.
83 In fact, the observation of Ms Noble (who attended the morning after at about 10.25 am), was that the laundry window appeared to have been open at the time of the fire. Her evidence was that she observed some damage to the chain being “fully retracted out of its casing” at the time, which told her the chain was “pulled out prior to the fire”.
84 The evidence of Detective Senior Constable Polson (who attended the morning after at about 10.00 am) was that he observed the laundry window to be “slightly ajar… a distance of maybe 15 centimetres”. Under examination, he further stated:
“And my recollection of the chain and I can’t remember which end it was not attached but it was – the chain was either not attached to the sash or not attached to the window, it had broken away and I can’t recall which one of the two.” (emphasis added)
85 His evidence under cross-examination was as follows:
“What you noticed with the laundry window is that it was partially opened? --- Yes, that’s right.
And the chain was broken? --- Yes.
And of course, with the chain being broken, that would allow the window to open as wide as anyone wished? --- Yes.
As wide as they could pull it? --- Yes.
And push it closed afterwards if they had wished to, to some extent? --- Yes.
And that is entirely consistent with a break-in, is it not? --- My recollection is that it physically didn’t open much further than about 15 centimetres, even with the chain broken.
That, of course, could have been the result of damage from the fire or the extinguishing of the fire, couldn’t it? --- It may well have been, I don’t know.
But a window open like that, with the chain broken is consistent with a forced entry isn’t it? --- It can be, yes.”
86 The evidence of Detective Polson is somewhat inconsistent as to the extent the window could open, but is evidence of the laundry window being open and damage done within 12 hours of the fire.
87 This evidence is also consistent with the observations of Ms Noble.
88 Both of these witnesses were experienced impartial police witnesses who gave evidence that is consistent with a forced entry via the laundry window.
89 The defendant submitted that the court should not reject the opinion of Mr Barnes without the benefit of a forensic expert called by the plaintiff.
90 However, Mr Barnes himself accepts that he did not actually test the laundry window by winding it. The evidence of Detective Polson that the window could be closed after entry is also consistent with an intruder closing the window on exiting the premises, and therefore consistent with the presence of sooting observed by Mr Barnes. There is also no actual evidence that any firefighter did the damage as Mr Barnes speculated. In any event, there appears no reason for a firefighter to break the chain for ventilation rather than simply opening the window.
91 In the light of all this evidence, a forced entry via the laundry window was certainly possible.
Conclusion
92 The defendant placed great emphasis on the expertise and experience of Mr Barnes and that the plaintiff called no forensic fire investigator in response.
93 I accept that Mr Barnes was a competent and well qualified witness. However, the court is entitled to consider the limitations of Mr Barnes’ evidence in a context where he was only able to inspect the house many months after the fire. As he himself fairly conceded, the sooner in time after a fire an examination is conducted, the better it is. Any other investigator who might have been called by the plaintiff would also be in a position where he/she would be unable to make observations the day after the fire as were both Ms Noble and Detective Polson.
94 The evidence presented allows for a number of potential means of forced entry. These include via a door and/or window, and particularly the laundry window. Although it is possible that the home was in fact secure, it is, at least, equally likely that there was a forced entry in the light of the available evidence.
95 Given the scope for a forced entry, I am therefore unable to be satisfied, as the defendant contends, that the house was locked and secured at the time of the fire.
Financial Motive
Evidence of Mr Wallace-Smith
96 The defendant relied primarily on a report of a Mr Wallace-Smith, accountant, as to the plaintiff’s alleged financial motive. He prepared a report of 14 October 2011, and also a short supplementary report of 2 November 2011 (which took into account the position of Bittern Drive if the market value was reduced due to termites). He elaborated on these reports under examination in chief.
97 Mr Wallace-Smith conceded that the longer the periods of time considered for documents like credit card and bank statements, the more informed an opinion can be.
98 He also conceded that:
· the plaintiff was meeting his credit card payments when they fell due;
· the plaintiff had not defaulted on any of his credit card payments;
· there were no instances of the plaintiff using one credit card to pay off another credit card;
· there was no evidence that the plaintiff had exceeded his credit limit;
· there was no evidence of extravagant spending; and
· the plaintiff’s behaviour (in paying more than the minimum on his credit cards) was not consistent with someone experiencing financial difficulties.
99 Mr Wallace-Smith could not determine the source of funds from which the plaintiff was making the credit card payments, but opined that the payments could be coming from another source.
100 There were also two main limitations with the evidence of Mr Wallace-Smith.
101 Firstly, given the nature of the defence, the crucial matter was what the plaintiff believed about his financial circumstances in the light of his evidence, rather than what Mr Wallace-Smith, as an expert, believed.
102 A second difficulty was that Mr Wallace-Smith did not take into account a third property, namely the Charles Green Avenue property, when considering the plaintiff’s position.
103 In relation to the second matter, the evidence was that the plaintiff had bought this property; that he paid $200,000 for the initial purchase and then paid for the mortgage payments, as well as the bills relating to the house, for some two years before his sister learnt English and obtained employment.
104 There was also evidence of correspondence from the NAB of 15 April 2009 at the time the plaintiff and his sister refinanced the three properties, with $603,000 being made available. According to the letter, the proceeds of $603,000 were allocated so that $378,000 was allocated to the Bittern Drive loan account; $78,000 to the Golden Beach loan; and only $147,000 to the Charles Green Avenue loan. This was despite the fact that, according to the plaintiff, the values of these properties were some $280,000; $50,000; and $330,000-$400,000, respectively (and which were originally purchased by borrowings for $98,000, $5,000 and $200,000, respectively).
105 However, the plaintiff’s evidence was that he determined that the amount of $147,000 only should be allocated to the Charles Green loan, based on “how much she [his sister] will be able to do the repayments monthly”, rather than on any apportionment based on values.
106 Although it would be difficult to determine the precise extent of the plaintiff’s beneficial interest in the Charles Green property, he would appear to have such an interest given his contributions as described above. More important, however, was how he personally saw the situation. Thus, his oral evidence was that he looked at the properties as “three properties” when considering financing arrangements. This was consistent with the way the whole family operated in pooling their resources. Thus, when asked why he increased his borrowings against Bittern Drive he said, “not only against that property, against all properties”. When pressed again he reiterated:
“I just explain for that amount didn’t belong only 9 Bittern Drive, it’s a joint account for amount of $600,000 belongs to me and my sister. It’s including three houses there, 9 Bittern Drive, Golden Beach and 66 Charles Green Avenue. 66 Charles Green Avenue probably $350,000, $400,000 but my sister is just a floor employee, she can’t make more money than I do. That’s why I take it $370,000 for myself…”
107 I accept this evidence, which means that Mr Wallace-Smith’s report has overstated any financial difficulties, at least insofar as the plaintiff’s assessment would be concerned.
Defendant’s case
108 The defendant put many calculations in the course of a lengthy cross examination. Although there were times that the plaintiff appeared to accept these calculations, there was little evidence that the plaintiff himself performed any such calculations as at the critical time leading up to the fire.
109 The pivotal matters relied upon by the defendant in closing were:
· that the borrowing pattern of the plaintiff from 2001-2010, and particularly the last 11 months prior to 27 March, was significant;
· that Mr Wallace-Smith opined that there was a deficiency of income as compared to expenses of some $31,913.28 based on the period 1 March to 27 March 2010;
· that the plaintiff’s perception of his asset position on a sale as at March 2010 meant there was a deficiency of $180,000, which would have been much improved on a successful insurance claim; and
· that, according to Mr Wallace-Smith, the plaintiff was insolvent as at March 2010.
Borrowing pattern from 2001-2010
Pattern over 10 years
110 The defendant highlighted the borrowing pattern of the plaintiff and suggested that the plaintiff had gone backwards over 10 years by various amounts: suggesting amounts of $350,000 and $423,000.
111 This borrowing pattern took place in a context wherein the plaintiff accepted that he refinanced a number of times through his broker, including with ANZ, Westpac, Commonwealth Bank and Bank of Melbourne, paying bank fees each time. His evidence was that this refinancing was done on the advice of his broker apparently because of better deals. However, as he was, at times, the single breadwinner for the entire family, he appears to have also used his asset base to obtain funds to live on. Thus, as he described it “whatever money I ask him [the broker] to - whatever money I needed he gave it to me”.
112 In terms of Bittern Drive, the plaintiff’s evidence was that he paid $98,000 for this house which was originally mortgaged 100%. By March, 2010, he notionally owed approximately $370,000, suggesting an increased borrowing of $272,000 although this was done in the context described earlier wherein a greater proportion was allocated to this debt than may have been necessary to give his sister some loan relief.
113 In terms of the Golden Beach property, the plaintiff purchased this for $5000 in about 2002 on a credit card, but had a debit balance of approximately $75,000 in respect of this property as at 19 March, suggesting an increased borrowing of $70,000.
114 This suggests that a figure of approximately $350,000 is correct ($272,000 + $70,0000= $342,000) although this does not allow for the credit cards which the plaintiff accepted, had increased to $65,000 (although the starting point was in some doubt).
115 However, an increase in indebtedness per se says very little about the plaintiff’s financial position, particularly in the absence of a consideration of the value of the (3) properties.
116 More importantly, there was no evidence whatsoever that the plaintiff had conducted any of these calculations for himself prior to the fire, nor that he considered that his borrowings had increased to such an extent that he was in financial trouble.
117 Thus, there was no evidence that he had attempted to rearrange the finance of his properties after April 2009, nor that he had made inquiries about selling any property. Rather his evidence was that “when I need money and I got that money to spend for my family”.
118 However, the defendant claimed that the urgency of the situation was evident from a study of the escalation of the credit card debt in the 11 months immediately prior to the fire, coupled with a drop in salary.
119 This period will therefore be examined more closely.
April 09- March 10
120 The plaintiff agreed that he went to the bank in 2009 because he wanted to pay out his existing credit cards, and also wanted to refinance the three properties.
121 In the result, the NAB letter of 15 April 2009 details that of the $603,000 provided, $524,508.02 paid out the previous financier; $18,010.64 paid for fees and charges and $60,481.34 was “surplus” paid into the Golden Beach loan account.
122 The plaintiff said that he had some $52,000 worth of credit card debt at this time, but that he only paid $25,000 off this debt, using the remainder of the $60,000 to renovate his sister’s bathroom, and send money to Armenia. He was therefore left with a credit card debt of $27,000.
123 The defendant made much of this, and compared it with the plaintiff’s later apparent agreement to the proposition that “having started with a nil balance, you’re back up to $65,000 within 11 months”. I was also invited to reject the plaintiff’s evidence (that he did not actually reduce his credit card to zero) on the basis that he did not produce credit card statements for April 2009, which would show how much of the credit card he had actually paid off.
124 I am not prepared to reject the plaintiff’s evidence on this aspect. As he stated his documents were destroyed in the fire. In any event, his expenditure on his family appears highly plausible while the difference between a “nil” position and the plaintiff’s evidence only amounts to some $27,000.
125 Moreover, even presuming that the plaintiff started with a credit card balance at “nil”, which increased by $65,000 some 11 months later, there was no evidence that the plaintiff himself felt significant financial pressure and certainly none such as would cause him to burn his house down. Instead, he described his financial situation as “normal”, which was consistent with the absence of default notices or other indicia of problems with his financiers.
126 Moreover, when the defendant put to him that his credit card was back up to $65,000, he suggested “…so what? Most people spend too much money”.
127 The defendant suggested that the plaintiff sought to deflect what he must have known about his credit card, by suggesting that his wife had use of the Citibank card also. This appeared to be inconsistent with the wife’s evidence that she only used the card in an emergency.
128 However, although the evidence as to the use of the credit card may have been unclear, the plaintiff gave forthright evidence that he was well aware of his credit card balances and read his credit card statements. The thrust of his evidence was that if he had a problem with credit cards or house payments, “I can go to the bank refinancing my credit cards again”.
129 I generally found this evidence to be plausible, particularly since it was consistent with the plaintiff’s approach in refinancing over the course of 10 years.
130 Moreover, even if the plaintiff was likely to, finally, be refused the option of refinancing, there was also no evidence that the plaintiff had even been to see the broker to try to refinance in the period leading up to March 2010.
131 The defendant suggested that the plaintiff should have called his finance broker to explain why he would not expect the plaintiff to refinance in March 2010. However, I do not consider the opinion of the broker to be something requiring elucidation given it was the actions of the plaintiff which are significant.
132 The defendant in fact accepted that the plaintiff had not actually been to see his broker and directly put this to the plaintiff. However, it was also put that the reason the plaintiff had not been to see his broker was because he planned to burn his house down.
133 The plaintiff firmly rejected this suggestion.
134 I accept the plaintiff’s evidence on this matter. It was generally consistent with the lack of evidence of defaults or demands such as might trigger a trip to the broker or other action. Moreover, the suggestion that the plaintiff might burn his house down rather than try a less drastic alternative remedy, such as refinancing, appears improbable.
135 The defendant also highlighted a reduction in the plaintiff’s salary between 2009 ($80,958) and 2010 ($60,282). However, the plaintiff explained this on the basis that he had received a payment in lieu of leave in 2009, which inflated his income. This was consistent with his income being more usually around the $60,000 figure, consistent with his ordinary salary in 2008. I am unable to be satisfied that the return to a salary of $60,000 precipitated a financial crisis as alleged by the defendant.
Income versus Expenditure
Defendant’s figures
136 The defendant also relied upon evidence of Mr Wallace-Smith who opined that for the period of 1-27 March 2010 the plaintiff’s income was $4284.24 (constituted by the plaintiff’s wages and his wife’s benefit), while his expenses were $6907 (which included living expenses as well as loan and credit card payments), leaving him with a deficiency of $2659.44.
Plaintiff’s figures
137 The plaintiff’s Counsel provided his own figures (in exhibit F), which suggested that the plaintiff had $55,227.12 in income ($907.85 per week in salary and $154.21 per week in his wife’s benefits). From this was to be reduced loan repayments of $34,580 ($1090 a fortnight for the home and $240 per fortnight for Golden Beach) leaving $20,647.12 remaining. When credit card payments of $12,800 were subtracted ($6,400 per annum based on 20% on $32,000 each), the plaintiff was left with available funds of some $7847.12 to live on.
Consideration
138 Mr Wallace-Smith only considers the position during a very limited time period notwithstanding that it is safer to examine a longer period of time. Mr Wallace-Smith’s evidence also does not take into account the evidence from the family since it was not available to him at the time.
139 Thus, there was also evidence that the plaintiff received further help from his sister who paid him $1000 a month. He also received help from his mother of $400-$500 a month. She also paid him $1000 every six months, although it was unclear when this commenced.
140 These amounts were confirmed by the plaintiff’s mother and sister. The sister’s capacity was also explained by the evidence of her daughters. Thus, Asya paid mainly $250 per week and Shoghik $250-$300 per fortnight.
141 I accept this evidence as plausible, given my observations of the family dynamic, and the extent to which the plaintiff had supported his mother and sister both prior to and after arrival in Australia.
142 The result is that the plaintiff had access to some $16,800 to $18,000 extra per year, although this meant that the plaintiff had little to live on, even on the plaintiff’s own figures.
143 Moreover, regardless of which figures are appropriate, there is some force in the suggestion that the plaintiff was living beyond his means. Thus, consistent with the plaintiff’s own evidence, the surplus of $60,000 paid to the Golden Beach account in April 2009 was completely dissipated by paying old credit debts and family (that account still had a debit of around $75,000 in March 2010). The plaintiff’s credit cards again increased from an amount of $27,000 to $65,000, being an increase of some $38,000 even on his own evidence.
144 Despite this, there is little to suggest that the plaintiff personally appreciated any need to curb his expenditure, and no evidence whatsoever that he even calculated his living expenses.
145 In fact the plaintiff’s evidence was that he was “fine”, denying that he knew “his expenses well exceeded his income” and stating “I don’t think that way.” His attitude was that he would be able to refinance if he needed to.
146 Although it was in the interests of the plaintiff to give this evidence, the evidence was consistent with the surrounding circumstances already enunciated, including that the plaintiff had successfully refinanced multiple times during the 10 year period leading up to March 2010, and that there was no evidence of a refusal to refinance, nor even that he had made a recent application to refinance.
147 Moreover:
· he had not sought to increase credit card limits;
· he had been paying all his mortgage payments and had received no notices of default in relation to any of the houses;
· there was no evidence of any attempt to obtain up to date valuations; indeed the plaintiff’s evidence was that he had not make any inquiries about selling any of the properties.
148 Although the plaintiff may ultimately have run out of facilities as the defence suggests, there is no evidence to suggest that he himself appreciated this.
Assets versus Liabilities
149 The defendant relied on the plaintiff’s perception of his asset position as being a negative amount of $180,000. The defendant suggested the assets constituted the value of the home at $275,000 ($280,000 less costs of sale of $5000) and the value of Golden Beach at $45,000 ($50,000 less costs of sale of $5000) and his Nissan car at $10,000 giving a total of assets of $330,000, from which was to be deducted the value of liabilities of $510,000, giving a $180,000 deficiency.
150 The defendant also prepared calculations to demonstrate that the plaintiff would be better off if he made an insurance claim, given that the amount he would receive would be some $755,000 (constituted by the land value of the home net costs at $255,000, plus the proceeds of the insurance at $440,000, plus the golden beach land at $50,000, plus the Nissan at $10,000).
151 Even if the amount of his debts of some $510,000 was subtracted, the plaintiff would be in a “net positive” position.
152 An immediate difficulty with these calculations is that, again, they do not take into account the value of the Charles Green property. In fact, the plaintiff’s evidence was that the total value of the three properties was around $680,000 to $730,000 (constituted by amounts of $280,000; $50,000 and $350,000-$400,000), which would have been sufficient to cover the plaintiff’s indebtedness ($510,000), and even that of his sister ($143,000 in March 2010).
153 The plaintiff’s valuation also had some foundation given it is unlikely that the NAB would have advanced the sum of some $600,000 in 2009, unless the value of the three properties comfortably exceeded such an amount.
154 In any event, there is, again, absolutely no evidence that the plaintiff saw things as the defendant did. To the contrary his evidence was that “before I wasn’t involved in this case I never understand what’s a liability, what’s whatever and I would never try to sell my house….”
155 Although the plaintiff should have appreciated that his assets were not unlimited, he did not present as a sophisticated man. Rather, he presented as someone who wanted to provide his children “everything” by regularly refinancing on the strength of the three properties.
156 When it was put to the plaintiff that he knew he would receive $444,000 if his house was destroyed by fire he gave the following evidence:
“I think they won't approve it for I burn my house, but accounting for my insurance money to pay my mortgage off. That's not true. I didn't burn my house and I never counted the money, whatever can get it from insurance or why I can't do rest. And I never have a difficulty with my financial stuff because in 2010 after when I refinanced my bank to the National Bank, after that I never got any financial institution to get the refinancing or I never got any broker to ask them to give me more money or I never mean to sell my house, even it's a lend, which I can sell it easy for $50,000 but I never did because I wasn't in financial difficulty. And my life was good and was happy because I have my family around me and I was living fine. I've got two kids, which I was dreaming for four years, and I was happy to spend everything, whatever I can to make them happy. And whatever you're saying, sir, is proving for I was calculating the insurance money to burn my house to get the money from there, that's not true.”
157 The plaintiff also gave evidence that he told an insurance investigator that he did not want money; he just wanted them to build whatever was already there.
158 I found this evidence credible. It was consistent with the relationships within the family; with the childless first marriage; and with the absence of any objective evidence that the plaintiff obtained any valuations and/or approached an estate agent and/or mortgage broker leading up to March 2010.
Insolvency
159 Mr Wallace-Smith concluded that, as the declared total income of the insured was insufficient to meet the Insured’s total expenditure requirements for the period 1 March 2010 to 27 March 2010, the insured was insolvent during this period.
160 Again, however, a crucial gap in the assessment of Mr Wallace-Smith is that he did not have the evidence this court has as to the third property, nor the evidence of the family contributions.
161 When asked about whether he ever did a budget the plaintiff also said the following:
“Well, with my income at - my - I understand - my budget, like with my income I pay my credit cards, I pay my repayments, I pay my bills and my daily - everyday livings. That is my budget.”
162 Under re-examination he also said that he had never performed calculations in relation to his living expenses; what he might receive if Bittern Drive/Golden Beach was sold and what he might receive on an insurance payout.
163 In these circumstances, any formal finding of insolvency did not translate into a motive to burn a house down.
Conclusion
164 I accept that the plaintiff appeared to be living beyond his sources of income and family support, given the increase in his credit card spending during the 11 months prior to March 2010. If this continued, the plaintiff would have undoubtedly run out of available finance as the value of his assets were not limitless.
165 Nevertheless, the evidence does not establish that the plaintiff himself was aware of any serious financial difficulty. Moreover, given the lack of evidence of defaults and/or attempts to improve liquidity (such as seeking more credit/ finance), I am not satisfied that the plaintiff was likely to have taken the extreme measure of burning down his house.
Likelihood of Arsonist
166 The defendant relied on a number of undisputed matters in submitting that the fire was not a “one-off” act of vandalism, the more significant as follows:
· the fire occurred in a quiet suburban street in a quiet residential neighbourhood late in the evening;
· there are more than 8000 residences in the suburb of Endeavour Hills and no evidence adduced of a house fire save for the fire at Bittern Drive;
· the plaintiff’s evidence was that he only told his mother and sister he was going to Golden Beach while the wife’s evidence was that she only spoke to her husband about it;
· there is apparently no report of a fire that night in Endeavour Hills save for at Bittern Drive.
167 Although the above matters highlight the randomness of any unknown arsonist, they do not of themselves support a positive finding that the fire was not a one off act of vandalism.
168 However, the defendant further relied on a “suspicious fires list” adduced by a CFA officer, Mr Cowley, and further evidence of Mr Lia in suggesting that the fire was not a one-off act of vandalism.
169 It therefore remains to consider this evidence as well as that of Detective Polson.
Mr Lia
170 As indicated already, Mr Lia was the Senior Station Officer at the Hallam Fire Station, which covered Endeavour Hills, Hallam, Doveton and parts of Narre Warren.
171 He stated that in the period from September 2009 to September 2010 he was not aware of any firebug activity in the district, in relation to these sorts of house fires.
172 He also gave evidence that his station attended over 1700 calls a year.
Mr Cowley
173 The defendant also called Mr Cowley, an operations officer for the CFA who manages the Fire and Incident Reporting System (FIRS).
174 Mr Cowley gave evidence of a document generated which was a summary record of suspicious fire activity in postcodes 3177 (Doveton area), and 3802 (Endeavour Hills), for the period 3 September 2009 to 28 September, 2010.
175 The document described 26 suspicious fires. A number involved rubbish or vegetation only (including one at Charles Green Avenue) with 3 fires where a structure was involved (the “suspicious fires” list).
176 He also adduced CFA primary reports in relation to the three incidents involving structures.
177 A difficulty with the suspicious fires list was that the fire in Bittern Drive was not actually included in the list. Mr Cowley conceded that this fire would not be classified as “suspicious” according to this record.
178 Mr Cowley explained that this was because this fire did not meet the criteria of the initial search, because the cause of the fire was undetermined, and with an investigation being called for. In such a case the local brigade do not complete the “ignition block”, or any of the other fields, but leave it to the fire investigation section. This was as compared with the others, which were specifically designated suspicious.
179 As conceded by Mr Cowley, the number of actual suspicious fires may, therefore, be significantly more than those shown on the list, because the table will only include those where the ignition source has been determined.
180 This evidence significantly reduces the probative value of the suspicious fires list.
181 Mr Cowley also agreed that there were a significant number of people who light fires on other people’s property each year in Victoria.
Detective Polson
182 As previously mentioned, Detective Senior Constable Polson also gave evidence in the case.
183 He had been stationed at the Narre Warren police complex in the Casey Crime Investigation Unit since 2009, with responsibility to investigate all crime within the City of Casey. This City included Endeavour Hills, Doveton, and Eumemmerring and was the largest municipality in Melbourne.
184 He gave evidence about the structural fires identified in the suspicious fires list.
185 The first fire at Doveton related to a fuel trail set through a house. However, the evidence of Detective Polson was that the instigator of this fire had made full admissions and had been dealt with by the Children’s Court. The boy was the son of a mother who was in a dispute with the neighbour victim.
186 The second fire related to a school and the third to a fire on the back porch of a family home. However, he was unable to assist with the other two fires and did not identify any known culprit.
187 He also gave evidence that from January 2009 there was no history of an arsonist or firebug type arsonist operating in the district, so far as house fires were concerned where somebody had entered a house and spread accelerant, and then set fire to the house.
188 However, he also stated under cross examination that he had investigated a very significant number of house fires and that, in a significant number where he had ascertained the culprit, the culprit was not the owner of the property. He described this as “more so than not”, and said such people were not generally responsible for a number of fires, but were “one off” fire setters.
189 He also stated that, where the culprit was not the owner, they were not always people who lived within close proximity, and that the use of petrol in house fires not lit by the owners was something “commonly seen”.
Summary
190 I am unable to be satisfied as to the frequency of suspicious fires based on the “suspicious fires” list, given the limits of that list.
191 I accept, however, consistent with the evidence of both Mr Lia and Detective Polson, that there was no known fire bug operating in the area.
192 The evidence otherwise leaves open the real possibility of an unknown vandal lighting this fire, particularly in the light of the evidence of Detective Polson, that it is more common than not that the culprit will not have been the owner of the property, and not generally a serial arsonist; further that the use of petrol in house fires not lit by the owner is something he “commonly saw”.
Conclusion
193 Given that I was not satisfied that the plaintiff had an opportunity to personally light the fire, the issue before the court came down to a choice between an “unknown conniver” connected to the plaintiff, and an “unknown criminal” (being an unknown enemy or otherwise).
194 As indicated already, the defendant relied on a number of matters to suggest that the evidence pointed to a person conniving with the plaintiff, on the balance of probabilities.
195 I accept that:
· the house is a well screened brick veneer house in a quiet residential street;
· the fire occurred at approximately 11.00 pm on a Saturday night on 27 March 2010 with no occupants in the house at the time of arrival of the CFA;
· there are more than 8000 residences in the suburb of Endeavour Hills and no evidence adduced of a house fire save for the fire at Bittern Drive;
· the plaintiff’s evidence was that he only told his mother and sister he was going to Golden Beach while the wife’s evidence was that she only spoke to her husband about it;
· there was no known enemy of the Khatchmanians identified on the evidence;
· the fire was deliberately lit; and
· there was no known fire bug operating in the area.
196 However:
· the plaintiff denied being involved in the fire. His evidence was generally consistent, plausible and firm, particularly in relation to the critical events of 27 and 28 March;
· Detective Polson, an experienced policeman, observed that the plaintiff was very distressed by what had happened to his home soon after it occurred;
· there was no clear “conniver” identified on the evidence;
· there was no evidence of belongings or possessions being removed before the fire;
· there was no connection identified between the plaintiff and the lighting of the fire, such as, for example, the purchase of the accelerant used;
· I am unable to be satisfied that the house was locked and secure at the time of the fire;
· the evidence does not establish that the plaintiff himself was aware of any serious financial difficulty. Moreover, I am not satisfied that the plaintiff was likely to have taken the extreme measure of burning down his house to the extent he was aware of any difficulty;
· it is more common than not that a vandal culprit will not have been the owner of the property and not generally a serial arsonist; and
· the use of petrol in house fires not lit by the owner is something “commonly seen”.
197 When consideration is given to all of the above matters, an unknown criminal is, at least, as likely as an unknown conniver, with the choice between them “a mere matter of conjecture”[13].
[13]Transport Industries v Longmuir (1997) 1 VR 125 at 141
198 I am therefore not satisfied that the defendant has discharged its onus in showing, on the balance of probabilities, that the plaintiff lit, or connived at the lighting of, the fire at his home. This is particularly the case having regard to the gravity of the matter alleged.
199 It follows that the first defence is rejected.
Defence 2: Clause reducing Quantum re Termites
200 The defendant relies on an exclusion clause in the policy which states that “we will not cover any loss or damage as a result of, or caused by…..insects.” The defendant says the property was damaged by termites as at the date of the (fire) event, and, therefore, that damage and cost of rectification was not covered by the policy.
201 Thus, the defendant says that the plaintiff’s claim should be reduced by the termite damage, costed by a Mr Crawley of Newton Kerr and Partners at $49,111 (contained in a report of 20 September 2011) or $77, 530 (contained in a report of 25 January 2012).
202 There was also an alternative way the defendant originally put this defence, that the value of the home had been diminished in accordance with the valuation of a Mr Quinn (who was also called). However, this was abandoned in closing submissions.
203 The plaintiff says that the exclusion clause does not operate as a matter of construction. Alternatively, that the defendant has not made out its application on the evidence.
204 A further submission based on s46 of the Insurance Contracts Act was abandoned in closing.
Construction
205 The plaintiff emphasized that no claim for insect damage had been made, but instead that he made a claim that his property had been totally destroyed by a fire. He emphasized paragraph 6 of the Notice to Admit, whereby the defendant was taken to have admitted that the house and contents were “destroyed” by fire on 27 or 28 March.
206 The plaintiff further relied on a decision of CIC Insurance; re Hygeia Dianthus Industries[14], which was concerned with a similar exclusion clause relating to disease. However, Moynihan J held that the exclusion clause had no operation, because the proximate cause of the loss of the relevant plants was a storm, which had damaged the insured’s greenhouse allowing in contaminated matter, and which carried the disease.
[14](1991) 6 ANZ Ins Cas 61-060
207 The plaintiff submitted that the destruction of the house by fire in this case operated similarly to a “novus actus interveniens”. being so potent as to be treated, in a practical sense, as the sole cause of the damage.
208 The decision of CIC did not assist the plaintiff since the disease was subsequent to, and consequent upon, the insured event of the storm. Here, the fire has followed after any termite damage.
209 In any event, I consider that if it is possible to identify, separately, damage as a result of, or caused by, termites immediately prior to the fire, it would be covered by the plain words of the exclusion clause. I also do not consider that such loss would occur “as a result of”[15] the fire within the meaning of the policy. Thus, any such damage would be already in existence, and it would be thereby impossible for the subsequent fire to render that damage.
[15] See Policy of Insurance dated 1 June 2007 at page 14.
210 The real issue in the case, however, was whether the evidence sufficiently substantiated the damage done by termites as at the time of the fire.
Evidence
211 In order to establish the extent of the infestation at the time of fire, the defendant relies on evidence of a Mr Wright. Mr Wright was a building consultant who had been assessing and undertaking building consultancy work for 18 years, and claimed to be quite “well versed” with termites. However, it is important to assess the evidence of Mr Wright in the light of all the evidence called on termite damage in the case, including the evidence led by the defendant’s main termites expert, Dr Thornton.
Extent of damage
Dr Thornton
212 Dr Thornton of John Thornton & Associates Timber Performance & Pest Consultants, specialises in the area of timber pest management issues, and the assessment and prediction of timber performance, including moisture management issues. Dr Thornton has a First Class Honours B. Sc in Botany, a Ph. D. in Plant Pathology, a Certificate IV in Building and a Diploma in Building Surveying, as well as considerable experience having been involved with the inspection of buildings since 1975.
213 He inspected the property on 7 October, 2011, and prepared a report dated 21 October, 2011.
214 In that report, he found termites and opined that he did not know how long termites had been present in the building, but suggested it could be as recently as six months, although it could be as long as 2 or 3 years. He further described that a ceiling joist from the lounge and a wall stud had disappeared, leading him to conclude that these two affected timbers were completely infested by the time of the fire.
215 At page 21 of his report he provided his opinion as to the extent of the infestation prior to and at the time of the fire on 27 March. At paragraph 16.2 he said that:
“The extent of infestation would include some floor frame and floorboards and wall frame and roof frame, in the vertical direction, and to some of those timbers in the entry and lounge and kitchen and laundry and meals and toilet and porch and passage, in the horizontal direction. (emphasis added)
216 Under examination, after being asked to give an opinion as to the degree of infestation of termites in March 2010 he responded as follows:
“Well, obviously that'd attacked the full length of that joist which is the full width of the room which presumably is something like about 3.5 or 3.6 metres so they'd been from one end to the other, so you'd have to say - and they got up there and then they go up and attacked at least - and destroyed half of that wall frame timber at the kitchen wall so they would be - they'd been about a bit and done something, not enough to flatten the building as it were but they have done something so it would have been there then, at least of a moderate nature in other timbers, at least but obviously not too extensive as far as the few timbers that got burned away, I can't say.” (emphasis added)
217 He was taken to the second cost report prepared by Mr Crawley of Newton Kerr and Partners, which purportedly costed the amount necessary to repair the termite damage immediately prior to fire, based on Dr Thornton’s own report. Dr Thornton asked “well, how do they know that?”, and suggested it would be “almost impossible” to work out the extent of termite damage at the time of fire, and did not see “why” they would have used his report to assess the precise extent of termite damage prior to the fire, given that his report did not specify such damage. He did, however, concede that 1 ceiling joist and 1 wall stud were “gonner(s)”, but that “the rest you’re not really sure about”.
218 Under re-examination, the following exchange occurred after Dr Thornton was taken to his report at paragraph 16.1 (which was dealing with the extent of infestation prior to and at the time of the fire):
“MR DONALD: Did you say at 16.1, "The nature of the infestation was an ongoing termite attack to timbers of the dwelling with all floor, frame and floorboards and wall frame and roof frame timbers being a potential food source for the Coptotermes species present in the dwelling"?‑‑‑Yes, the potential is there.
MR DONALD: Is that an opinion which you still stand by?‑‑‑Yes, I mean all the materials that have (indistinct) this dwelling, all the timbers in there are susceptible.
MR DONALD: And at 16.2, "The extent of infestation would include some floor frame and floorboards and wall frame and roof frames in a vertical direction and to some of those timbers in the entry and lounge and kitchen and laundry and meals and toilets and porch and passage in a horizontal direction"?‑‑‑I think there'd have been some ongoing termite activity and damage there over (indistinct)…
MR DONALD: And in paragraphs 14.4 and 14.5 which I took you to in evidence-in-chief where you talked about the widespread horizontal distribution of termite damaged timber and you talked about the evidence that you saw and again in the same - in the vertical distribution of termite damaged timber ‑ ‑ ‑?‑‑‑Mm.
MR DONALD: And again, I won't repeat that but that damage is the same damage to which you're referring to in 16.2, isn't it?‑‑‑Yes, it is, bearing in mind that they got to both ends of the ceiling joist that was about three by four, three by six or something, metres, and to the end of - up to the top of that wall stood, you'd have to say, well, they've found that and they've done something along the way, you would expect and ‑ ‑ ‑“ (emphasis added)
219 In these circumstances, although the thrust of Dr Thornton’s evidence was that there was “something”, it would be “almost impossible” to define the precise extent as at 27 March 2010.
Mr Hendy
220 The defendant also called a Mr Hendy, a pest technician, to give evidence about termites.
221 He inspected the property on 3 December 2010 and reported termite damage widespread throughout the house in a report dated 8 December 2010. However, the size of the colony was not known, and “the infestation could have been happening for up to ten years depending on the size of the termite colony”.
222 He also gave evidence that he could not say how long the termites had been there.
Mr Wright
223 However, as previously indicated, the defendant also called Mr Wright.
224 He attended the property on 13 July, 2010 and prepared a “scope to repair”, which distinguished between works necessary to undertake for fire damage and works necessary to repair for insect damage as at the time of his inspection.
225 He opined that as a result of the fire the vast majority of the home was destroyed, although some components were capable of being salvaged being 60% of the floor framing; 40% of the wall framing; and 40% of the external brickwork including a concrete slab. He confirmed this in examination.
226 However, during the course of his inspection Mr Wright observed that “significant” white ant and borer activity had been in the home. He considered that the home would have to be demolished in its entirety, given it was not worth salvaging the remaining components by reason of the insect damage.
227 Under cross examination, he agreed that termites can shell out an entire roof joist in 6 months; that the post fire environment was a good environment for termites; that there could have been additional damage post fire and that “some” of the damage he could say was pre-existing though “some of it” he “can’t”. He could not rule out the fact that some of the damage may have occurred after the fire, stating that he could not rule out that “possibility“.
228 Ultimately he conceded that the fire had engulfed the home resulting in the vast majority of the home being destroyed.
229 He agreed that he was unable to say the total extent of the termite damage when the fire occurred.
230 However, under re-examination, he suggested that an (undefined)
“majority” of the termite damage that he viewed was present prior to the fire.
Mr Crawley
231 The evidence of Mr Crawley took the matter no further for the defendant given he did not inspect the property, but based his report on the “scope of works” prepared by Mr Wright.
Summary
232 The evidence of both Dr Thornton and Mr Hendy suggests that it was “almost impossible” to quantify the extent of the damage rendered by termites at the time of the fire.
233 The defendant suggested that I should prefer the evidence of Mr Wright over that of Dr Thornton, given he looked at the damage closer in time and had been a building assessor for a number of years.
234 However, Dr Thornton had impressive qualifications and experience in the area of termites, which was the critical area in assessing the extent of termite damage immediately prior to March.
235 Further, although some of Mr Wright’s evidence may be utilised, as Mr Crawley did, to estimate the cost of undertaking remedial works, Mr Wright was not really retained to precisely define the termite damage at the time of the fire. As he himself conceded, he could only accurately divide between “some” pre-fire and post-fire termite damage.
236 In the light of the evidence of both Dr Thornton and Mr Hendy I am not satisfied that the defendant has quantified the extent of the termite damage at the time of the fire, such as to establish a defence based on the exclusion clause.
237 The defence based on the exclusion clause is thereby rejected.
Conclusion
238 There will be judgment for the plaintiff in the amount of $525,162.50.
239 The counterclaim is dismissed.
240 I will hear from the parties as to the precise form of final orders.
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