Mira Rezo v NRMA Insurance Limited
[2004] ACTSC 123
MIRA REZO v NRMA INSURANCE LIMITED
[2004] ACTSC 123 (30 November 2004)
INSURANCE – contract of insurance – theft of insured vehicle – allegation of fraud.
FRAUD – requirement of cogent proof in civil claim.
Simon v NRMA Insurance Ltd (unreported, NSW Court of Appeal, 22 October 1992)
Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366
William Derry v Sir Henry William Peek (1889) 14 AC 337
Purcell v State Insurance Office (1982) 2 ANZ Insurance Cases 60-495
Neat Holdings Pty Ltd v KarajanHoldings Pty Ltd (1992) 110 ALR 449
Briginshaw v Briginshaw 1938) 60 CLR 336 at 362
No SC 559 of 2001
Judge: Connolly J
Supreme Court of the ACT
Date: 30 November 2004
IN THE SUPREME COURT OF THE )
) No SC 559 of 2001
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:MIRA REZO
Plaintiff
AND:NRMA INSURANCE LIMITED
Defendant
ORDER
Judge: Connolly J
Date: 30 November 2004
Place: Canberra
THE COURT ORDERS THAT:
There be judgment for the plaintiff in the sum of $60,600 plus interest.
The defendant pay the plaintiff’s costs.
This is a claim for damages pursuant to a contract of insurance. The plaintiff, Mira Rezo, claims the sum of $60,600 pursuant to a policy of insurance taken out with the defendant on 15 May 2000 in respect of an Audi A6 motor vehicle. It is the plaintiff’s case that this motor vehicle was purchased by her on 1 May 2000 for the sum of $78,000, and that is the agreed value under the contract of insurance.
The plaintiff claims that the vehicle was stolen on 21 September 2000 from the multi-level car park at the Belconnen shopping mall in the Australian Capital Territory. The vehicle was later recovered, stripped, in Sydney. The plaintiff’s claim is for the difference between the agreed value of the vehicle under the policy, namely $78,000, less the salvage value on the recovered stripped vehicle of $17,000, and the excess on the policy, being $400, for a claim of $60,600, plus interest.
The defendant admits the policy of insurance, but denies that the vehicle was stolen, and relies on an exclusion within the terms of the policy in that it contends that the loss and damage to the vehicle was intentionally caused with the express or implied consent of the plaintiff. The defendant has also pleaded that the plaintiff breached a term of the policy that entitles the defendant to refuse payment by asserting that the plaintiff was not being truthful and frank in alleging theft. In short, the defendant alleges that the plaintiff was knowingly engaged or concerned in the theft and the stripping of the vehicle for the purpose of making an inflated insurance claim.
The Law to be applied
There was no real dispute between the parties as to the law to be applied in such a claim. The plaintiff must prove, on the balance of probabilities, that the vehicle was stolen so as to come within the terms of the policy. “Stolen”, for these purposes, has been defined by Samuels AP in Simon v NRMA Insurance Ltd (unreported, NSW Court of Appeal, 22 October 1992) to mean –
taken away without the cooperation or connivance of the appellant; the only reasonable alternative was that the appellant was involved in the vehicle’s disappearance from the place where it had been parked.
If this question is determined adversely to the plaintiff, there would be judgment for the defendant. If the plaintiff is successful in establishing, on the balance of probabilities, that the vehicle was stolen, then it is necessary to consider the defendant’s contention that the theft of the vehicle was a fraudulent one. The approach of first determining whether the plaintiff has discharged the onus of proving theft, and then considering the defendant insurer’s claim of fraud, was endorsed by the NSW Court of Appeal in Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366.
Fraud is a dishonest act or omission with an intention to deceive so as to obtain a material advantage (William Derry v Sir Henry William Peek (1889) 14 AC 337). Where an insurer asserts fraud, the onus shifts to the insurer to prove that the plaintiff was involved in or knew of the fraudulent event or activity (Purcell v State Insurance Office (1982) 2 ANZ Insurance Cases 60-495).
Although the insurer need only establish this on the balance of probabilities, an allegation of fraud requires clear or cogent proof. The test to be applied was set down by Mason CJ, Brennan, Deane and Gaudron JJ in Neat Holdings Pty Ltd v KarajanHoldings Pty Ltd (1992) 110 ALR 449 where their Honours said -
The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary “where so serious a matter as fraud is to be found”. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J commented in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362.
“The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved ...”
The Evidence: Was the vehicle stolen?
The plaintiff was born in Croatia and came to Australia in 1971. She has been married since she was 18, and is now 50 years of age. Her husband is a concrete finisher and a builder, and she works as a contract cleaner. She has always worked, either part or full-time, even when she had her three children, who are now all adults. Her husband operates as a builder as well as a concrete finisher. She said that over the years they have built up their assets to a position where they now own seven houses with a modest mortgage debt.
Her older daughter, Mrs Sadek, has been married for some eight years to a Mr Sam Sadek, a motor dealer in Sydney. Mr Sadek has a criminal record, and has served time in jail for rebirthing motor vehicles, that is to say, rebuilding stripped stolen vehicles and selling them as a different legitimate vehicle. He did not give any evidence in this case. Mrs Sadek said that she and her husband have been separated since he served his jail sentence in 2001.
The plaintiff said that she and her husband both had old utes which were work vehicles, and she usually also had a better car. These were originally Australian vehicles, but she later purchased an European car, acquired from her son-in-law. The plaintiff has purchased two motor vehicles from her son-in-law. In April 1999 she purchased a BMW from his business for $30,000. In cross-examination she denied knowledge that that vehicle had been acquired by Mr Sadek shortly prior to the sale to her for $20,600 at auction. This does not, it seems to me, go to her honesty, but rather indicates that Mr Sadek was prepared to make a quick and considerable profit from his mother-in-law.
The plaintiff says that in May 2000 she saw the Audi in the car yard, and indicated that she thought it was a nice car. She says that Mr Sadek said that she could trade in the BMW and pay him $17,000 for the Audi, which had a notional price on it of $79,990. This is what she did. There are documents tendered in her case being the NSW Department of Fair Trading Motor Dealers Act Form 4, and the Roads and Traffic Authority Copy Notice of Sale, both of which show that the listed price for the vehicle was $79,990, and that it was sold to the plaintiff for a cash price of $78,000 on 15 May 2000, with a trade-in allowance of $61,000. The defendant makes much of the discrepancy between the price Mr Sadek paid for the BMW, $20,600, the price at which he sold it to the plaintiff, being $30,000, and the trade-in value that he gave her on the Audi purchase for the BMW, being $61,000.
The plaintiff says that only one key was ever provided to her when the car was delivered to her in Canberra by Mr Sadek. When it was delivered to her it still had NSW registration, and she says that Mr Sadek told her that he would later attend to registering the vehicle in the ACT for her. This was in fact never done, and the car remained under NSW registration, in the name of the car dealership, until it was stolen. This was a six month registration, and was to expire on 21 September 2000, on which day it was stolen.
The vehicle was insured under an insurance policy dated 16 May 2000. The plaintiff says that this was arranged over the telephone by her daughter. She said that she asked her daughter to do this because –
Well, if they ask me sort of questions about how many cylinder and this and that I don’t know, you know. I don’t know much about cars.
She says that she paid for the insurance but her daughter arranged the policy. The policy identifies the vehicle by the correct registration and Vehicle Identification Number, but incorrectly states that it is an “Audi Quattr Sedan”. This presumably refers to an Audi Quatro, which is a four-wheel drive Audi sedan. The vehicle is in fact an Audi A6, a conventional two-wheel drive sedan, which is a less expensive model than the Quatro.
The plaintiff says that on 21 September 2000 her daughter and grandson were visiting her. The plaintiff went to work in the morning in her utility, and on her return she, her daughter and her grandson decided to go to Belconnen Mall. She said that as the ute was messy, they decided to take the Audi. She says that she parked on the side of the mall that opens into what was then Grace Brothers, and parked on the middle level of the three level car park. She says that she locked the car, and went into the shops where she and her daughter had a cup of coffee. After about an hour they decided to go to another shopping centre, and returned to the car park, where they could not find the car. They then went to the Belconnen police station and reported the car as being stolen.
Mrs Sadek gave evidence which was consistent with her mother’s evidence about going to Belconnen Mall, and returning to find the vehicle missing from the car park. Both the plaintiff and Mrs Sadek denied any involvement in the disappearance of the vehicle.
It is common ground that the vehicle was found on 26 September 2000 in Sydney, and that it had been professionally stripped of many parts. The vehicle was sold at a salvage price of $17,000.
The defendant says that the plaintiff had a motive for financial gain having regard to the differential between the price she paid for the vehicle and the insured price. Against this, there is the evidence that the plaintiff and her husband were in no financial distress and indeed have, through hard work, acquired a number of residential properties over the years. Mrs Sadek, in cross-examination about the differential between the price paid for the BMW and the trade-in price allowed, referred to the fact that she and her husband had borrowed money from her parents in the past, and “always owed them money”. This would provide some answer to the odd discrepancy in prices, in that by allowing an inflated trade-in they were in effect repaying some debt.
More significantly, the plaintiff says that when she put in the insurance claim, she just wanted the car fixed and returned to her, which would of course involve no financial gain at all. The defendant assessed the vehicle as a total loss, and declined to repair it. Evidence emerged on the resumed hearing of this matter that the vehicle, which was sold at a salvage price, was in fact re-registered in New South Wales in August 2001. This, it seems to me, shows that the plaintiff’s assertion that all she wanted was her car repaired and returned is credible. The defendant, for commercial reasons, took the view that the level of damage to the stripped vehicle warranted it being regarded as a total loss, but the stripped vehicle was resold and has been repaired and re-registered. The defendant’s primary attack on the plaintiff’s credibility is that she was motivated by financial gain. Against this, the plaintiff presents as a person who has worked hard and built up significant assets and has no pressing need for funds. She says that all she wanted was for the vehicle to be repaired and returned and if the defendant had done this, she would have experienced no financial gain. That she may experience a gain is, it seems to me, entirely due to the defendant’s decision not to repair the vehicle.
It seems to me that the plaintiff has satisfied me, on the balance of probabilities, that the vehicle was stolen from the Belconnen Mall car park on 21 September 2000, and that she had no involvement with the vehicle being taken.
Can the insurer discharge the onus to show fraud?
The defendant called a number of witnesses to seek to discharge the onus placed on it to satisfy me, on the balance of probabilities but bearing in mind the Briginshaw principle, that the plaintiff was involved in insurance fraud.
Mr McKenzie was an employee of the defendant between 1987 and 2001 as a vehicle loss assessor. He identified in his report a number of items about the vehicle that raised suspicion in his mind. He was of the view that the vehicle had been professionally re-sprayed and had marks consistent with it having been involved in a major repair and rebuild. He suggested that it had marks consistent with it being moved by a forklift, which would indicate that it may have been previously written-off as an insurance total loss, and rebuilt and re-sprayed. This may indicate that Mr Sadek was passing off a rebuilt vehicle as a vehicle in better condition, and inflating the price that he charged, but I do not see how it goes to any knowledge or involvement by the plaintiff.
Mr McKenzie also expressed the view that the vehicle, despite damage to the lock and ignition mechanism, had been entered and started with a key. The plaintiff’s evidence was that she only ever received one key, and that she had that with her after locking the car and leaving it in the car park. It is a possibility that Mr Sadek, who has served jail time for dishonest activities involving motor vehicle theft, did have a second key, and either used this to take the vehicle, or gave it to someone else. But such an inference should not be lightly drawn, and the defendant would have to draw a further inference that the plaintiff was herself complicit in any dishonest activities by her son-in-law. There is simply no material that would justify such an inference.
Mr Seidl is an employee of the Insurance Australia Group which is now the parent company for NRMA Insurance, and manages a technical security research unit for them. He gave evidence that the Audi was fitted with a sophisticated engine immobiliser system, and that such a system is very difficult to override. This evidence, says the defendant, also goes to suggest that the vehicle was moved from the Belconnen Mall by someone with a key.
Mr Douglas, a master locksmith, also gave evidence that in his view it was very difficult to override the lock in the Audi, again going to draw the inference that the vehicle was moved with a key.
Both Mr Seidl and Mr Douglas agreed in cross-examination that studies show that, despite the fitting of sophisticated lock systems with engine immobilisers, there is still a significant number of thefts of such vehicles. They agreed that an Australian study of such thefts showed that there were a significant number of unexplained disappearances of vehicles fitted with such devices, and they both further conceded that one Australian study indicated that Audis had a higher level of such unexplained theft than other vehicles with equivalent immobiliser devices.
It seems to me that the evidence tendered by the defendant goes to show that there were suspicious circumstances surrounding the disappearance of this vehicle, and that it was either removed by a person having a key, or by a person using some as yet unknown and unexplained method of overriding the engine immobilising system. Such a method could be known to professional car thieves, and it was the view of Mr McKenzie that the vehicle had been professionally stripped. But of course this is equally consistent with the vehicle being taken by professional car thieves entirely unconnected with Mr Sadek, let alone the plaintiff.
The chain of reasoning that the defendant invites me to embark on here to find fraud would involve a series of inferences being drawn to establish that the plaintiff was complicit in Mr Sadek retaining an additional key to the vehicle after it came into her possession, and being complicit in Mr Sadek taking the vehicle so that the plaintiff would obtain an insurance pay out and he would benefit by the sale of the stripped parts. This has been denied on oath by the plaintiff, and she says that all she ever wanted was for the car to be repaired. Whilst the defendant may say that this was a charade and that the plaintiff knew that the car would be assessed as being unrepairable, the fact is that it has been repaired and has been re-registered and is back on the road. Mr Sadek did not give evidence, and even if I were satisfied to the requisite standard that he was somehow involved in the theft, there is nothing, it seems to me, that points to the plaintiff being knowingly involved in such fraud. The defendant, it seems to me, has not established this scenario on the balance of probabilities, as it has not established the “clear or cogent or strict proof [that] is necessary where so serious a matter as fraud is to be found” (Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd).
It was common ground that, if there was a judgment for the plaintiff, it should be in the sum claimed even though the evidence may show that the agreed value of the Audi was greater than the market value. Mr McKenzie says that the car was probably worth $58,000. However, the plaintiff when she put in her claim says, and this has not been seriously challenged, that all she wanted was the car repaired, and the decision to not repair the vehicle and instead deem it to be a total loss, which under the terms of the policy require the agreed value to be paid out, rests with the defendant.
Accordingly, there should be judgment for the plaintiff for the sum of $60,600 plus interest. The defendant is to pay the plaintiff’s costs.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.
Associate:
Date: 30 November 2004
Counsel for the plaintiff: Mr P Bevan
Solicitor for the plaintiff: Baker Deane & Nutt
Counsel for the defendant: Mr Mahoney SC
Solicitor for the defendant: Abbott Tout
Dates of hearing: 18 February 2004, 10 November 2004
Date of judgment: 30 November 2004
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