Toubia v Schwenke S116/2002

[2002] HCATrans 651

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S116 of 2002

B e t w e e n -

ELIAS TOUBIA

Applicant

and

ADAM PAUL SCHWENKE

Respondent

Application for special leave to appeal

GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 DECEMBER 2002, AT 2.54 PM

Copyright in the High Court of Australia

MR M.L. WILLIAMS, SC:   I appear for the applicant with MR D.T. KELL, if your Honour pleases.  (instructed by Carroll & O’Dea)

MR A.J. STONE:   May it please the Court, I appear for the respondent.  (instructed by Sparke Helmore)

GUMMOW J:   Yes, Mr Williams.

MR WILLIAMS:   Your Honours, this is a small case involving a judgment of less than $20,000 and we appear for a man who was found by the trial judge to be a fraud.  However, it raises important questions about which there have been differing views expressed by various intermediate appellate courts.  The respondent submits to the orders of the court on the application.  As your Honours will see from pages 87 to 88 of the application book the respondent, in the interests of one of the largest motor vehicle insurers in this State, suggests that there will be increased litigation in this field in the future.

GUMMOW J:   Now, the text of section 66, set out at page 50 ‑ ‑ ‑

MR WILLIAMS:   It is at page 80 in our submissions and pages 50 to 51 in the judgment book.

GUMMOW J:   The judgment book, yes.

MR WILLIAMS:   Yes, your Honour.

GUMMOW J:   Now, why, on an ordinary meaning of the section, should you not have lost?

MR WILLIAMS:   Because section 66 does no more, in our submission, your Honour, than state the common law of fraudulent misrepresentation.

GUMMOW J:   Well, why would it just do that?

MR WILLIAMS:   Well, one wonders, in a sense, but the elements of ‑ ‑ ‑

GUMMOW J:   Yes, it is designed to give a new remedy, to start off with, is it not?

MR WILLIAMS:   Well, it may have been designed to, but ‑ ‑ ‑

GUMMOW J:   It says so.

MR WILLIAMS:    ‑ ‑ ‑ when one analyses it, it does no more than state what remedy would have been available to the insurer on a plea of fraud.

GUMMOW J:   Only by reading words into it, really.

MR WILLIAMS:   Well, to establish fraud one needs to establish a knowingly false statement which intentionally induces another to act upon it to his detriment.  Section 66 involves precisely those elements, that is, a knowingly false statement causing the claimant to pay a benefit; that is, to act upon it to his detriment.  So in practical terms, the section does no more, and what we submit, your Honour, is that the long learning about res judicata and abuse of process and the fresh evidence test, more importantly, should be applied to it.

CALLINAN J:   No, it does more than that.  It obviates the need that would otherwise exist to institute a fresh action, to set aside the judgment on the grounds of fraud, to which all sorts of special rules apply, including that the defendant in such an action has a particular onus to demonstrate that the action should be stayed.  There are all sorts of special rules applying to that situation which do not apply under this new procedure which section 66 makes available.  There are all sorts of difficulties in bringing an action to set aside a judgment procured even by fraud.

MR WILLIAMS:   Certainly.

CALLINAN J:   And this avoids those.

MR WILLIAMS:   Well, it should be read, in our submission, in the light of those principles, because otherwise the way in which the Court of Appeal and the trial judge read this leads to a number of undesirable consequences:  firstly, that what has been referred to as the scandal of inconsistent judgments - more importantly, the potential for considerable duplication of proceedings - it leads to the prospect of ‑ ‑ ‑

CALLINAN J:   I think fraudulently obtaining a judgment is a pretty scandalous thing too, is it not?

MR WILLIAMS:   It is, your Honour; we do not shirk from that, but what it leads to is, in this very case, the prospect of further litigation.  As your Honours may have seen from the facts, the applicant lost $20,000 of $29,000 of his judgment.  Now, there is nothing to stop the insurer, if the Court of Appeal and the trial judge were right, in coming back now and saying, we have conducted further investigations and we want to start another action to strip you of the rest of the $9,000 that was allowed by the judge for future medical expenses.

CALLINAN J:   Well, why should they not, if the finding was a fraud?

MR WILLIAMS:   Well then there would be no time limit on those proceedings and no end to the amount of litigation which this case could generate in similar cases, your Honour, and the courts have consistently spoken against ‑ ‑ ‑

GUMMOW J:   At some stage commonsense would intrude and it would be vexatious obviously to be continuously harassing. What do you say about page 90 paragraph 17, the reaction to this notion that you have:

to incorporate a fresh evidence test.

MR WILLIAMS:   What we say is that there are countervailing considerations and they were pointed to in the submissions, your Honour, that the insurers – and this is a case involving the motor vehicle insurers of this State – were required by the legislation to take an active and early involvement in investigation of claims and finalisation of the proceedings, and we have given the references to the submissions there, section 45 and section 64A of the old Act.  It is contrary to the public interest and the legislative intent, in our submission, to allow the insurers to, in effect, sit back and await the outcome of either an arbitration or the first proceeding before deciding whether to conduct further investigations.

CALLINAN J:   Why did they not assume that the plaintiff will tell the truth, or the claimant will tell the truth?  Why should they assume that he or she will not?

MR WILLIAMS:   There is no doubt that that is right, your Honour, but the problem is that in this case, as the facts came out, they had film of the applicant.  They proved that he was a liar before the first tribunal and they had set in train steps to conduct further investigations.  They never explained why they did not ‑ ‑ ‑

CALLINAN J:   I find that a very unattractive submission ‑ ‑ ‑

MR WILLIAMS:   It is not an attractive case, your Honour, but it is an important ‑ ‑ ‑

CALLINAN J:    ‑ ‑ ‑ that an insurer is under some sort of an obligation to find the plaintiff out or to find the claimant out.

MR WILLIAMS:   Well, they had found him out.  They were under an obligation, in our submission, to complete the job ‑ ‑ ‑

CALLINAN J:   Well, they did not find him out fully.

MR WILLIAMS:    ‑ ‑ ‑ rather than to sit back, suffer the judgment, not take steps to prevent the judgment becoming a final judgment and then to, at leisure, we put, and there was no explanation to the contrary, some months later go along and conduct investigations which could have been carried out before.  That is the point of the application, your Honours.  We say, your Honours, that the cases that we have summarised in paragraph 28 on page 84 of the application book, the decision of the Full Federal Court in Monroe, Schneider ‑ ‑ ‑

GUMMOW J:   Well, I sat on that; that has nothing to do with this case.

MR WILLIAMS:   Well, with respect, your Honour, the ‑ ‑ ‑

GUMMOW J:   What it does is throw up all the complexities in the general law ‑ ‑ ‑

MR WILLIAMS:   It does, but it points out ‑ ‑ ‑

GUMMOW J:    ‑ ‑ ‑ to which section 66 was directed to provide a simple direct remedy.  That is the mischief, if you like, to which 66 is concerned to provide an alleviation.

MR WILLIAMS:   Well, we would submit it is not expressed that way, your Honour, and that ‑ ‑ ‑

GUMMOW J:   But it is on the plain words.  You want to read words into it by reference to the anterior law which the plain words would suggest are being supplanted.

MR WILLIAMS:   What we want to do is ask the Court to interpret it in a way which meets the more important public policy considerations of finality of litigation and into multiple proceedings arising out of the same set of circumstances.  That is the point that we wish to put, your Honours.

CALLINAN J:   You say it is an abuse of process for a defendant to be in possession of sufficient information to ground an allegation of fraud and have the means of fully investigating that matter, so that the insurance company has to go out and spend a whole lot of money and time investigating a claim because it should assume that the claimant, having been fraudulent, in one respect, would have been fraudulent in a number of other respects.  Is that the submission?

MR WILLIAMS:   On the facts of this case, it was not as drastic as that, your Honour, because what they had done is gone to the site at Bankstown, spent some days filming the man.  All they had to do was walk in and speak

to the employer and then the whole of the factual scenario would have been laid out before the litigation was concluded at first instance.  Putting it the way that your Honour does, does not, with respect, accurately put the facts ‑ ‑ ‑

CALLINAN J:   Well it does put it accurately.  It is still a question of, according to you, the insurer being under an obligation to conduct further investigations.

MR WILLIAMS:   If they have started an investigation and they can complete it readily and without great expense or inconvenience, then public interest, in our submission, requires that they do so, your Honours.  That is the point that we wish to agitate.

GUMMOW J:   We do not need to hear from you, Mr Stone.

The Court is of the view that the decision of the New South Wales Court of Appeal was correct.  Accordingly, the application for special leave is refused and refused with costs.

AT 3.03 PM THE MATTER WAS CONCLUDED