Zeait v Insurance Australia Limited t/as NRMA

By summons filed on 24 November 2016 the plaintiff, Nini Zeait, appeals pursuant to s 39 of the Local Court Act 2007 (NSW) and, to the extent necessary, seeks leave to appeal pursuant to s 40 of the Local Court Act from the decision of Tsavdaridis LCM on 2 November 2016 in so far as it relates to the judgment entered against them in favour of the defendant, Insurance Australia Ltd t/as NRMA Insurance. The defendant opposes the relief sought. As the plaintiff was the plaintiff in the Court below and the defendant was the defendant in the Court below, each will be referred to by this description in these reasons.

The substantive relief sought by the plaintiff is that the appeal be allowed; the judgment of the Local Court be set aside; that there be judgment for the plaintiff on the statement of claim; and that the defendant be ordered to pay their costs. In the alternative to the orders for judgment, the plaintiff seeks an order that the matter be remitted to the Local Court for re-hearing.

In the Court below the plaintiff claimed a liquidated sum of $60,050 from the defendant which she alleged constituted the agreed value of her motor vehicle (the Plaintiff’s Vehicle) which was insured by the defendant under a policy of comprehensive motor insurance. She alleged that the vehicle was involved in an accident in which it sustained “extreme damage” ([5] of the statement of claim). In its defence, the defendant admitted the policy of insurance and that the agreed value of the Plaintiff’s Vehicle was $60,500. In response to [5] of the statement of claim, and following, the defendant alleged:

In the Court below the plaintiff failed in her claim against the defendant. The hearing commenced on 1 November 2016 (Day 1) and concluded on 2 November 2016 (Day 2). At the conclusion of the hearing, his Honour delivered ex tempore reasons and ordered judgment in favour of the defendant. The plaintiff was ordered to pay the defendant’s costs on an ordinary basis up to and including 2 October 2014 and thereafter on an indemnity basis.

The magistrate identified the following facts as not being in dispute.

The Magistrate identified the following bases on which the defendant opposed the claim (at T 3.46-4.1-.41, Day 2):

His Honour referred to authority in a manner which has not been the subject of challenge. He then recounted the various versions the plaintiff had given of the accident in her Statement of Evidence dated 7 August 2014; the telephone lodgement of her claim on 13 August 2013; her recorded interview with the defendant’s investigator, Mr Giampietro, on 31 October 2013; a further recorded interview with Mr Giampietro on 23 December 2013; and her oral evidence on 1 November 2016 in which she adopted her Statement of Evidence and was cross-examined. The plaintiff’s case solely comprised her evidence.

The defendant tendered the report of Mark George, an accident investigation reconstruction expert. His Honour summarised Mr George’s evidence in the reasons and identified the questions raised by Mr George about the accident. Mr George identified the material on which he relied, which included a statement of Salim Zeait, the plaintiff’s husband, dated 7 August 2014. Mr Jobson, who appeared in the Court below and in this Court on behalf of the plaintiff, tendered the statement of Mr Zeait in the cross-examination of Mr George, as being a document to which he had had regard.

His Honour also referred to the evidence of Suzanne Pankiw, who was described as an “independent witness”. Ms Pankiw swore an affidavit on 25 September 2014. There had been earlier proceedings in the Local Court on the same claim before Brown LCM but the orders made at the conclusion of proceedings were the subject of an appeal to this Court, as a consequence of which the orders made by the Local Court in the first proceedings were set aside and the matter remitted to the Local Court for hearing in accordance with law. Ms Pankiw had given evidence at the first proceedings, but was so unwell that she could not attend court for the second proceedings. Ultimately, the parties agreed that her evidence would comprise the affidavit, together with the transcript of her cross-examination in the Local Court on 22 June 2015, which was tendered.

The Magistrate summarised Ms Pankiw’s evidence in his reasons as follows. Ms Pankiw lived in the immediate vicinity of the roundabout where the accident involving the Plaintiff’s Vehicle is alleged to have occurred. Her residence overlooked the area. At approximately 8.30pm to 9pm, she was looking out the window, patting her cat, and she saw two cars at the roundabout. She distinguished between them on the basis that one was lighter and the other was darker. Her evidence was that the darker coloured car had stopped in the roundabout and “was stationary for one or two seconds when the other car came up very close and collided with the car in the roundabout". She also said: "I saw that after the collision, the car in the roundabout moved towards the kerb . . . [which] had grass on it. It looked to me like the car mounted the kerb after the collision." She said: "I then saw the car that was hit [the Plaintiff’s Vehicle] . . . whilst in the roundabout reverse back towards the roundabout" and "The car that hit the other car in the roundabout reversed a short distance, maybe several feet back and then drove into the car in the roundabout again." She estimated that the second collision happened two or three minutes after the first and that the impact from the collision was to the passenger side of the car in the roundabout. She said that “after the collision, a male get out of the car” and apparently spoke to the driver of the other car, the Plaintiff’s Vehicle, although she “did not see them exchange details”. She then saw the man get back into the car, and watched both cars drive away from the roundabout by driving up Chetwynd Road. Ms Pankiw also said that: "Maybe an hour after the two cars left the roundabout, the darker car, the one that was hit in the roundabout came back on Chetwynd Road and turned right at the roundabout onto Morris Street and drove away. I recall being surprised that he was still driving."

In cross-examination, Ms Pankiw confirmed that she had seen two collisions and that the persons in the vehicles had not got out of the cars between the two collisions, but only after the second. She said that she had not taken down the registration numbers and could not be sure that the car she saw an hour after the collisions was the same car but said that “it looked like it."

His Honour considered the evidence given by Ms Pankiw and the evidence given by the plaintiff and said that Ms Pankiw:

The Magistrate said, of Ms Pankiw’s evidence:

His Honour noted that the plaintiff had not called her husband to give evidence in her case and noted Mr Jobson’s submission that no adverse inference in accordance with Jones v Dunkel (1959) 101 CLR 298 ought be drawn against the plaintiff as her husband’s statement had been tendered (in the circumstances set out above). Mr Jobson submitted that no Jones v Dunkel inference was available against the plaintiff but would be available against the defendant for not calling Mr Baalbaki, the driver of the other vehicle. The Magistrate considered that a Jones v Dunkel inference could be drawn against the plaintiff for not calling Mr Baalbaki. His Honour said, at T 24.28-.37, Day 2:

His Honour resolved the conflict between the plaintiff’s evidence and Ms Pankiw’s evidence as follows, at T 25.22-.42, Day 2:

At the conclusion of his reasons and before making orders, his Honour made the following findings of fact:

The plaintiff alleged the following grounds of appeal in her summons:

At the commencement of the hearing of the appeal Mr Jobson was granted leave (which was not opposed) to add the following ground, the substance of which was addressed in his written submissions:

Mr Jobson did not press ground 9. He did not expressly abandon other grounds. However, his submissions, which were not made by reference to any identified ground, largely concentrated on grounds 3, 4 and 10. I will endeavour to address the substance of his submissions and relate them, where possible, to the grounds set out above.

As referred to above, these proceedings, which were commenced in the Local Court by statement of claim filed on 8 April 2014, were the subject of an earlier appeal to this Court, as a result of which the judgment for the defendant was set aside and the matter remitted to the Local Court. The transcript of the proceedings before Tsavdaridis LCM shows that his Honour disclosed that he had read the judgment of Harrison AsJ in this Court. He revealed as much at the commencement of the hearing, in the following terms at T 1.25-.27, Day 1:

Shortly after this statement, when Mr Jobson foreshadowed an opening, his Honour said at T 2.28-.30, Day 1:

In the course of the defendant’s brief opening (before the plaintiff called evidence), his Honour said at T 5.7-.15, Day 1, when Mr Jobson said that he was taken by surprise by the suggestion that there were three impacts:

At T 6, Day 1, Mr Jobson said that he wanted the opportunity to cross-examine Ms Pankiw, to which his Honour responded at T 6.43-.44, Day 1:

At T 8, Day 1 in the Court below, there was then a further discussion about the unavailability of Ms Pankiw due to her ill-health. Tsavdaridis LCM raised the issue that Brown LCM, who had heard the matter on the first hearing and who had, accordingly, heard Ms Pankiw give evidence, was not available. At T 9.17-.20, Day 1, Tsavdaridis LCM said:

The question of what ought be done about Ms Pankiw’s evidence was, as referred to above, resolved by agreement.

On none of the occasions referred to above when Tsavdaridis LCM indicated that he had read the decision of Harrison AsJ did either party object.

In the reasons for decision Tsavdaridis LCM said, of present relevance at T 2.5-.30, Day 2:

Mr Jobson also relied on finding 6 (set out above), on T 16.21-.25, day 2 in which Tsavdaridis LCM said:

Mr Jobson also relied on the passage from the reasons at T 24.29-.30, Day 2, which is set out above, in which Tsavdaridis LCM revealed his knowledge that the plaintiff had relied on the evidence of Mr Baalbaki in the first hearing but not the second.

Mr Jobson argued that a fair-minded lay observer who read this part of the judgment might reasonably observe that Tsavdaridis LCM would not bring an impartial and unprejudiced mind to the resolution of the question: Johnson v Johnson (2000) 201 CLR 488; [2000] HCA 48 at [11] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). He submitted that the Magistrate found exactly what Brown LCM had found: that the accident was staged and that the plaintiff ought not be believed. Mr Jobson contended that:

The relevant test for apprehended bias was as stated in Re Refugee Review Tribunal; Ex Parte H [2001] HCA 28; (2001) 75 ALJR 982 at [28] (Gleeson CJ, Gaudron and Gummow JJ):

The principle, as articulated in Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 at [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ) is:

I reject the plaintiff’s submissions that there was any reasonable apprehension of bias. The judgments of this Court on appeal from the Local Court are intended, not only to correct error in particular cases, but also to have a salutary effect on magistrates, who are entitled to read such decisions for guidance, just as judges of this Court read decisions of courts, including those which are higher in the judicial hierarchy. The insinuation that a reasonably fair-minded observer would draw the inference alleged is, in my view, misplaced. The hypothetical fair-minded observer is to be assumed to be aware of the actual circumstances of the case: Hot Holdings Pty Limited v Creasy (2002) 210 CLR 438; [2002] HCA 51 at [68] and [76] (McHugh J). In the present case, such a person would, on this hypothesis, know that his Honour disclosed to the parties at the outset of the hearing that he had read the decision; that no party raised any objection to his Honour having done so; that his Honour had accepted Mr Jobson’s submission that he ought not permit himself to be influenced by any part of what occurred before Brown LCM; and that his Honour had expressly confirmed that he accepted that submission in the reasons for decision. Moreover, such a person would have been aware from the terms of his Honour’s reasons that, although he was aware that Mr Baalbaki had given evidence at the first hearing, this was not the reason why his Honour considered Mr Baalbaki to be in the plaintiff’s camp.

Moreover, Mr Jobson’s submission had an air of unreality about it. The principal issue in the proceedings was, to put it in the simplest of terms, whether the accident was a real accident or one which was staged to enable the plaintiff to obtain a pay-out from the defendant. That two successive magistrates found that it fell into the latter category is unsurprising when the defendant relied on evidence from a disinterested witness, Ms Pankiw, as to what had occurred. The plaintiff’s version was redolent with inconsistencies, which amounted to a further reason to prefer the evidence of Ms Pankiw.

Far from tailoring his conclusion to a pre-determined outcome (as the plaintiff alleged) Tsavdaridis LCM came to conclusions after extensive and detailed reasons which were delivered ex tempore at the conclusion of the hearing. I reject this ground.

Mr Jobson submitted that the Magistrate was in error in regarding Mr Baalbaki as being in the plaintiff’s “camp”. I have already addressed this submission in the context of the allegation that there was a reasonable apprehension of bias. I propose to deal with this submission now in the context of the allegation that the Court below was in error in drawing an inference adverse to the plaintiff from her failure to call Mr Baalbaki. Mr Jobson endeavoured to support this submission by pointing out that the defendant had tendered the record of the plaintiff’s two interviews with its investigator in which, on occasions, the plaintiff was asked about the version which had been given by Baalbaki. This submission appears to have been based on the misapprehension that the questions in a record of interview form part of the evidence irrespective of the answers.

In effect, Mr Jobson submitted that the defendant had adopted Mr Baalbaki’s version by having its investigator put his version to the plaintiff in interviews and that therefore Mr Baalbaki was in the defendant’s camp. This submission misapprehends the process of investigation, which involves a process of questioning to ascertain, in the case of a motor accident, what actually happened when the vehicles are said to have collided. It does not follow from the fact that the investigator put Mr Baalbaki’s version to the plaintiff that it was the “defendant’s case” that Mr Baalbaki’s version was correct. Effectively, Mr Jobson’s submission in this Court rested on the false premise that the rules and conventions of court procedure relating to the need for one party to put its case to the other party’s witnesses apply to a motor accident investigation. When a proposition is put to a witness by counsel for a party in cross-examination, this signifies that the proposition forms part of the case of the party for whom the cross-examiner appears. This principle is the foundation of the rule in Browne v Dunn (1893) 6 R 67: see Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 at 26 (Hunt J). This rule has no application in an investigation such as the one conducted by the defendant in respect of the alleged accident. The Court below did not err in not considering this circumstance to be relevant to which party’s camp Mr Baalbaki belonged to.

The question whether a Jones v Dunkel inference is available is largely a question of fact since it requires an assessment of what “camp”, if any, the witness falls within. In the present case, the Magistrate found that Mr Baalbaki was in the plaintiff’s camp because he could have corroborated the plaintiff’s version, or given evidence regarding the chronology of events on which the plaintiff relied, or given evidence about the precise circumstances of the collision, or collisions. It is not part of this Court’s jurisdiction to revisit questions of fact. If the question is a mixed question of law and fact, I decline leave as I regard the Magistrate’s assessment of what inference was appropriate to be pre-eminently one of fact. I discern no error in the Magistrate’s approach. Moreover, finding 5 on T 26 (Day 2) appears to have had little, if any impact, as his Honour accepted the evidence of Ms Pankiw, which he preferred over the plaintiff’s evidence.

Mr Jobson developed this ground in oral submissions and confirmed that the finding referred to was finding 6 (set out above). He contended that all that his Honour did was to set out the different versions which had been given by the plaintiff at various times and found that he preferred the evidence of Ms Pankiw. He submitted that his Honour’s reasons were inadequate to explain that preference, which he accepted formed the basis for finding 6. He relied on the following passage from The Nominal Defendant v Kostic [2007] NSWCA 14, in which Ipp JA (Hodgson and Campbell JJA agreeing) said:

I am not persuaded that this ground has been made out. In my view, his Honour set out sufficiently his reasons for preferring the evidence of Ms Pankiw to that of the plaintiff in the passages set out above, which formed the basis of finding 6. That a witness, particularly one who is a party, and therefore interested in the outcome of the proceedings, makes several inconsistent statements (the plaintiff in the present case) is of particular significance, particularly when weighed against the evidence of a disinterested eye-witness whose evidence is consistent (Ms Pankiw): see the discussion of credibility in Onassis and Calerropolous v Vergiottis [1968] 21 Lloyds Rep 403 at 431.

Mr Jobson submitted that it was not open to his Honour to find that the plaintiff was not entitled to be indemnified under the policy in circumstances where his Honour expressly rejected the defendant’s claim that the plaintiff’s claim was fraudulent within the meaning of s 56 of the Insurance Contracts Act 1984 (Cth). In order to address this submission it is necessary to analyse the pleaded defence and his Honour’s reasons.

It can be seen from the parts of the defence extracted above that the defendant denied liability on bases which included: first, that the claim was excluded under the contract of insurance ([4(a) and (b)] of the defence); and, secondly, that the defendant was entitled to refuse payment of the plaintiff’s claim pursuant to s 56(1) of the Insurance Contracts Act on the ground that it was made fraudulently ([7] and [8] of the defence).

The basis of the allegation made in [4(a) and (b)] was the exclusion on page 23 of the Product disclosure statement and policy booklet, which was in evidence as Exhibit 5 (the Policy), of:

As has been set out above, in finding 6, his Honour found that the defendant had proved that the damage to the Plaintiff’s Vehicle was “loss or damage caused intentionally”: T 26.24, Day 2. His Honour also found that the Plaintiff’s Vehicle was stationary at the time it was struck by the other vehicle: finding 4 at T 26.15-.16, Day 2. Accordingly, his Honour found that the exclusion clause applied and the defendant was, as a consequence, not liable to pay the plaintiff’s claim. This was the basis on which judgment was entered for the defendant.

His Honour was not satisfied that the defence under s 56(1) of the Insurance Contracts Act had been made out. Section 56(1) of the Insurance Contracts Act provides:

His Honour said, in finding 7 (T 26.26-.28, Day 2), that the defendant had not made out statutory fraud.

Mr Jobson submitted, in effect, that the defendant had not pleaded the exclusion and the magistrate had not sufficiently identified the exclusion clause, or its terms, in the reasons for decision such that it was not possible to discern on what basis the plaintiff’s claim had failed. I reject this argument. It was plain from [4] of the defence that the defendant relied on the exclusion on page 23 of the Policy set out above. Mr Carolan, who appeared for the defendant in this Court as well as in the Court below, identified the page of the Policy and the specific exclusion relied on in his submissions (which on this point were given before Mr Jobson’s submissions commenced), at T 55.8-.18, Day 1. At no point in the hearing below did Mr Jobson indicate that he was taken by surprise by this submission, which I consider to be in entirely in accordance with the defendant’s pleaded case and the evidence it had adduced. Moreover, Mr Jobson specifically addressed the magistrate in the Court below on the question whether the collision was “deliberate”, which picked up the terms of the exclusion clause relied upon by the defendant and corresponded with his Honour’s finding that the damage was “intentionally caused”.

In finding 6 his Honour referred to the exclusion in terms. There was no unfairness to the plaintiff from the defendant’s raising the issue in its defence or from his Honour’s finding.

In addition, Mr Jobson appeared to contend that there was such an inconsistency between the finding regarding the exclusion clause and the finding that statutory fraud had not been made out that I should infer error. He submitted, in effect, that the Court below could not rationally have found both that the exclusion clause had been made out but that statutory fraud had not been. In order to address this submission it is necessary to consider what it means to make a claim “fraudulently” within the meaning of s 56(1) of the Insurance Contracts Act.

If the insured makes a false statement with knowledge in a claim to induce the insurer to meet the claim, the claim is made fraudulently. The dishonest intent is established by the making of a statement which is false to the insured’s knowledge at the time it is made. It does not matter for these purposes whether the false statement is material to the insured’s claim: To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279; [2001] VSCA 48 at [19]-[23] (Buchanan J, Charles and Calloway JJA agreeing). Thus, in this context, proof that the plaintiff’s claim was made fraudulently requires proof to the requisite standard, the balance of probabilities, having regard to the “reasonable satisfaction” required in light of the seriousness of the allegation: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 (Dixon J); [1938] HCA 34.

While it would be difficult to conclude that one could find the exclusion clause made out without finding at least some element of dishonesty, what is required to prove the exclusion clause is substantially different from that which is required to be proved to establish fraud under s 56(1) of the Insurance Contracts Act. In the latter instance, the defendant was obliged to prove that particular statements were false to the knowledge of the plaintiff at the time they were made. Moreover it would be open to the tribunal of fact to consider that the “reasonable satisfaction” required to find that the defence under s 56(1) of the Insurance Contracts Act was made out was greater than that required to be satisfied that the defendant had discharged the onus of proving the exclusion clause. As the passage set out above from T 3-4, Day 2, of the reasons shows, the magistrate plainly distinguished between the various bases on which the defendant defended the claim. In particular, his Honour distinguished between the allegation that the claim was excluded by the Policy and the allegation of statutory fraud.

A useful analogy can be drawn between the present case, which arises in a civil context, and a challenge to jury verdicts following a criminal trial on the grounds that they are inconsistent. The Court of Criminal Appeal considered the question in R v Markuleski (2001) 52 NSWLR 82; [2001] NSWCCA 290, in which a jury returned a verdict of acquittal on one count preferred in an indictment charging multiple counts of sexual offences and convicted in respect of the other counts. Wood CJ at CL said:

That the magistrate was disinclined to find statutory fraud reflected, in my view, no more than an appropriate reluctance to make such a serious finding against a party, in light of the evidence. While the Court below was prepared to conclude that the “accident” was not, in truth, accidental (thus establishing the exclusion relied upon by the defendant that the damage was caused intentionally), his Honour was not prepared to conclude that the plaintiff had made any particular statement to the defendant which was false to her knowledge at the time it was made in order to obtain payment of her claim. In my view, his Honour’s reasons are ample to explain both findings. I am not persuaded that error has been shown.

Mr Jobson submitted that his Honour had erred in failing to take into account the circumstance that Mr Baalbaki made a claim in respect of the same accident which was paid by the defendant. I was unable to discern the ground to which this submission related.

The first, but not the only, answer to this submission is that a matter of fact cannot be a mandatory relevant consideration in the absence of a statutory provision which has that effect, either expressly or by necessary implication: Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 39-40 (Mason J).

Secondly, it is difficult to see why the payment of Mr Baalbaki’s claim is relevant, in circumstances where the evidence established that it was accepted to be valid on 21 August 2013 and finalised on 29 August 2013, prior to Ms Pankiw being interviewed by the defendant’s investigator on 30 October 2013 ([19] of Ms Pankiw’s affidavit of 25 September 2014). Without Ms Pankiw’s evidence, the defendant had no apparent reason to believe that the claim was other than genuine and, presumably, paid Mr Baalbaki’s claim on that basis. However, before the plaintiff’s claim was paid, the defendant became aware of what Ms Pankiw saw and, as a consequence, declined to pay the plaintiff’s claim.

Mr Jobson submitted that the defendant failed to put to the plaintiff that the accident was staged and failed to put Ms Pankiw’s evidence to the plaintiff. I have been unable to relate this submission to any alleged ground. However, having considered the cross-examination of the plaintiff as a whole, and in particular the questions asked of her at T 38.49-39.29, Day 1, I reject the submission. Among other propositions put to the plaintiff, it was suggested to her in cross-examination that the damage to her car was not caused in the way described in her evidence. Moreover the affidavit of Ms Pankiw was served in accordance with the directions of the Court such that the plaintiff had notice of the basis of the defendant’s defence. Thus, even had the propositions not been put as directly as they were at T 38-39, Day 1, the plaintiff was plainly on notice of the case she had to meet: Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation at 26 (Hunt J).

Once again, Mr Jobson did not relate this submission to any ground in the summons. He submitted that the Court below ought to have found that the defendant failed to act in good faith and that, had this finding been made, the plaintiff would have succeeded. It was open to the Court below to find, as his Honour did, that the exclusion clause applied and that, accordingly, the plaintiff was not entitled to payment of her claim. I do not discern any proper basis on which the magistrate could, or should, have found that the defendant acted in bad faith.

None of the grounds alleged in the summons or otherwise raised in the plaintiff’s submissions has been made out. Accordingly, the summons must be dismissed. I have not heard the parties on costs. Absent any other consideration it is appropriate that they follow the event. However, in order to give the parties an opportunity to make an application for a different order, I will make provision for that in my orders, which are set out below.

I make the following orders: