Sgro v Australian Associated Motor Insurers Limited

[2016] HCATrans 34

[2016] HCATrans 034

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S209 of 2015

B e t w e e n -

ANTONIO SGRO

Applicant

and

AUSTRALIAN ASSOCIATED MOTOR INSURERS LIMITED ABN 92004791744

Respondent

Application for special leave to appeal

GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 FEBRUARY 2016, AT 12.37 PM

Copyright in the High Court of Australia

MR J.C. KELLY, SC:   Please the Court, I appear for the applicant.  (instructed by Elmassian Lawyers)

MR B.J. BURKE:   I appear for the respondent.  (instructed by Courtenay & Co Solicitors)

GAGELER J:   Mr Kelly.

MR KELLY:   As your Honours will appreciate, the issues in the proposed appeal concern the interplay between section 56 of the Insurance Contracts Act and the well‑known common law principle exemplified in authorities such as Simon v NRMA.  In a nutshell ‑ ‑ ‑

GAGELER J:   Mr Kelly, if your client loses in the case in‑chief, why is it necessary to go on and deal with the defence?

MR KELLY:   It is not necessary but – and it need not have happened, but it did and in the process findings were made which were to the advantage of my client by reason of those findings negativing the only other possibility, namely that the vehicle in question was not the subject of an insurance fraud.  There are specific findings.  One needs to distinguish two different classes of case, one in which there is a multitude of possible causes for the happening of an insured event, including fraud - the scuttling cases provide an example.  Thus, if one negatives scuttling, one does not end up with a necessary outcome because there are still a range of other possible causes for the loss of the vessel which it behoves a plaintiff to prove.

A second category of case, however, is where there are only two rational alternatives – in this case, theft, as alleged by the plaintiff, or no theft, in the sense of insurance fraud.  Once the tribunal of fact does – and in this case it was at the urging of the defendant – go further and consider that question of fraud and in that context does in fact make findings which negative the fraud and kill it off absolutely as an alternative, it follows, in our respectful submission as night follows day, that the only rational conclusion that can be drawn is that theft be proved on the balance of probabilities.

Let me show your Honours one of the very simple findings which, in our respectful submission, completely kills the alternative of insurance fraud.  That is to be found in paragraph 115 of the primary judge’s reasons for judgment at page 23 of the application book.  There your Honours will see:

There are mysteries and anomalies in the evidence.  They do not amount, however, to proof of consent to abstraction of the vehicle.

That finding is a finding which completely kills the particular fraud alleged by finding squarely against the necessary intention.

KEANE J:   But it is not inconsistent with the – in fact it is distinctly consistent with the court’s unwillingness to accept that your client’s vehicle was lost to him by theft.  It is an indication of a degree of – of a lack of satisfaction with the evidence, but an unwillingness to find your client guilty of fraud.  The judge has taken this view – is the judge taking a view that reflects an approach that judges in insurance cases have been taking for a very long time.

MR KELLY:   Certainly, but what has not happened in any of those cases over that very long time is the making of positive findings which negative the alternative of fraud.  All of the cases, be they the shipping cases or the various motor vehicle cases referred to in the parties’ written submissions, all of those are cases which do not go beyond a finding of no satisfaction on the balance of probabilities that the insured event occurred.  What is different about this case is that the court did so proceed and did make findings which are fatal to fraud as an alternative.  If I can take your Honours in particular to page 61 of the application book, your Honours will see where the reasoning in the Court of Appeal went very wrong.  Paragraph 73, your Honours see:

The respondent’s defence did not plead, as it should have done in order to engage the application of s 56(1), that the appellant had knowingly made each of the false statements for the purpose of inducing it to accept his claim that the vehicle had been stolen. One consequence of –

that is said to be that the primary judge did not make a finding –

as to the appellant’s alleged fraudulent purpose –

I will show your Honours in a moment that that is quite incorrect, the primary judge did make a finding in relation to the absence of the relevant fraudulent purpose.  The second consequence said to be in paragraph 74:

A second consequence of this deficiency in the pleading was to create apparent uncertainty as to whether the respondent had made a positive case that the claim was fraudulent because the vehicle was known by the appellant not to have been stolen.

Now, the reference I have just given your Honours to - they do not amount, however, to proof of consent to abstraction of the vehicle - makes it perfectly plain that there was no uncertainty in the mind of the primary judge. That is a finding about the very state of mind relevant to that component. When it comes to the fraudulent purpose, the relevant finding there is to be found in paragraph 138 at page 27 of the application book, where your Honours will see that what is here being debated, pursuant to the defendant urging the court to find that the insurer was entitled to refuse the claim under section 56, your Honours will see a short but telling analysis relevant to the state of mind, relevant to the purpose, of the applicant. In 137:

Counsel for the plaintiff argued that each of the false answers could be explained by Mr Sgro being unsure about the precise events of the day rather than being made with a dishonest intent.

Then her Honour says:

I agree up to a point.

Her Honour goes on to say:

I am not prepared to find that, particularly with respect to his movements . . . time . . . route –

et cetera, I am not prepared to find that they –

were made with a dishonest intent to induce a false belief in the insurer.

Now, the up to the point qualification is, of course, referable to the matter which follows in paragraph 137 where there is a finding against the applicant but that is a finding that was set aside by the Court of Appeal, and there is no challenge to that, so it can be completely disregarded.  So one has a finding that statements made – and these statements are all made in the process of the making of the insurance claim.  Here the findings are:  were not “made with a dishonest intent to induce a false belief in the insurer”.  So at both levels, the level of conduct and the level of intention, the fraud relevantly alleged in the making of the claim is negatived.  It is not just left as something unproven.  They are findings which put the fraud as alleged to the sword.

KEANE J:   No, they are findings that the court was prepared to conclude that he had lied in the statements he made to the insurance company.  If you look at page 62, paragraphs 75 and 76 ‑ ‑ ‑

MR KELLY:   Yes.

KEANE J:   ‑ ‑ ‑ that is recording that her Honour was not satisfied the vehicle “had been parked in that street at any time” during the period when it was said to have been stolen.  In relation to that, her Honour relies on the evidence of the third party who had no axe to grind and his evidence was plainly accepted.

MR KELLY:   His evidence relevantly was in relation to a time of day on the evening of 17 December when the witness at the same time conceded that his recollection of times was not particularly good.  That is a factual matter which I am not in a position to challenge as such.  The challenge relevantly to 75 and 76 comes out of 76 where his Honour says:

In so concluding, the primary judge made clear that her finding was not a finding of fraud . . .  Nor was her Honour’s conclusion necessarily equivalent to a finding of fraud –

for the reason there stated.  But what his Honour does not deal with is the findings to which I have directed your Honour’s attention are necessarily equivalent to a finding of no fraud because once one has negatived both the conduct and the purpose, being the subject matter enlivened exactly by the quoted portion of the particulars at the top of page 61, namely the words:

the defendant says that the plaintiff arranged for his vehicle to be taken from one place (where it was parked) to another place (unknown) to be kept in secret so that an insurance claim could be made in respect of [that].

That is the pleading of particular conduct, the fraudulent abstraction of the vehicle, for the dishonest purpose of making a false insurance claim.  We get that clearly out of the words “so that”, and indeed, if there was any room for doubt, the following paragraphs in the defence which is set out in the submissions at application book page 77, your Honours see that having set that portion out, in the following particulars of the special claim for costs we see:

As to the claim for costs:

I.         The claim is false -

meaning the insurance claim referred to in the previous paragraph, and:

II.       The plaintiff seeks to use the court as an instrument of that fraud.

So one has a case in which there are only two rational alternatives:  theft or insurance fraud.  Insurance fraud, although it was not necessary for the court to proceed and make findings, it was urged to do so and it did do so and those findings have the effect of negativing insurance fraud as an alternative.  As night follows day on the balance of probabilities, there is no weight any more on the insurance fraud side of the swing and, on the balance of probabilities, the finding of theft was the only finding that could and should have been made with the result that the plaintiff should have succeeded in his claim.  Of course, in the long history of insurance litigation, it is clearly established as a matter of law that if everything is equal a plaintiff fails, but ‑ ‑ ‑

KEANE J:   So that a defendant who pleads fraud can fail to satisfy the burden that the defendant assumes, particularly bearing in mind Briginshaw, but nevertheless, notwithstanding that the defendant has failed to establish the case of fraud, one can have the case where, as it is said in paragraph 76 here:

it was open to her Honour to find that she was not satisfied the vehicle had been stolen where the probability that it had been stolen was equal to the probability that it had not ‑ ‑ ‑

MR KELLY:   Yes, but of course, the analysis does not stop there.  One must take the next step which is to look to the particular findings that were made and in a case in which those findings in a shipping case would negative scuttling, in a motor vehicle case such as this clearly, in our submission, negative insurance fraud, the findings in relation to the facts then enter the equation and disturb the balance which might otherwise have been established by negativing that possibility.

KEANE J:   Mr Kelly, in the shipping cases, to negative scuttling is not to prove loss by perils of the sea.

MR KELLY:   I am sorry, your Honour, that is what I thought I was saying.  That is why the shipping case ‑ ‑ ‑

KEANE J:   So, by a parity of reasoning, to negative fraud is not to prove loss by reason of an insured peril, namely theft.

MR KELLY:   Not quite, in our respectful submission.  That was the basis for my drawing attention to a distinction between cases in which, or sets of circumstances in which there is a multitude of possible causes whereupon knocking one of them off does not go anywhere towards a plaintiff proving which of the others was the cause and was a cause within the perils of the sea.  But in a case in which one is not looking at a multitude of possible causes, one is looking only at two, and on that point Justice Meagher in paragraph 76 makes it crystal clear where he speaks of there being only – the only reasonable alternative in a case in which there are only two rational possibilities and one is negatived, the other must prevail on the balance of probabilities, otherwise the balance of probabilities takes us into the theatre

of the absurd where if there are not any competing possibilities how can it be anything other than the case that the one surviving possibility obtained.

GAGELER J:   I thought you criticised paragraph 76.

MR KELLY:   Yes, your Honour, and it is not that bit – we criticised 76 in that his Honour is looking at the alternatives where his Honour says:

In so concluding, the primary judge made clear that her finding was not a finding of fraud –

no problem with that:

Nor was her Honour’s conclusion necessarily equivalent to a finding of fraud –

no problem with that.  Her Honour did not find fraud, her Honour found no fraud.  Her Honour found in relation to the conduct and in relation to the purpose, her Honour made findings in favour of the applicant without which fraud is impossible.  So what we criticise in the first part of 76 is his Honour’s omission to deal with the other alternative which is that her Honour’s findings were equivalent to a finding of no fraud, because once one has negatived dishonest intent, then there is no fraud available in a set of facts such as this.  They are my submissions, if it would assist your Honours.

GAGELER J:   Thank you, Mr Kelly.  We do not need to hear from you, Mr Burke.

We are not satisfied that this case raises any question of principle suitable for the grant of special leave to appeal.  Special leave to appeal will be refused with costs.

The Court will now adjourn to 2.00 pm on Tuesday, 1 March in Hobart.

AT 12.57 PM THE MATTER WAS CONCLUDED