Kalloghlian v Chubb Insurance Company of Australia Ltd

The Plaintiff made a claim on the Defendant, his insurer, in respect of a Rolex watch that went missing when he was in Rio de Janeiro on 13 July 2014. He made a claim on the Defendant the day after he returned to Australia being a matter of days after the watch was lost. The insurer rejected the claim saying that he had not proved his loss.

The Plaintiff commenced proceedings in the Local Court initially claiming damages of $25,000 in relation to the watch. The claim was amended to claim that sum as a debt under the insurance policy.

After a contested hearing his Honour Bradd LCM delivered a reserved judgment on 11 December 2015 where he entered a judgment for the Defendant. The Plaintiff now appeals from that judgment asserting an error of law in a failure to provide any or any adequate reasons in relation to a number of issues in the proceedings.

The Plaintiff has relied on 13 grounds of appeal as follows:

Ground 13 is now not pursued. The Plaintiff agrees that grounds 10 and 11 are merely two aspects of the complaint in ground 9 of a failure to provide any or any adequate reasons. On their face, all of the grounds now pursued except grounds 6, 7 and 8 involve a complaint of a failure to provide any or any adequate reasons. Counsel for the Plaintiff said that grounds 6, 7 and 8 were also part of the complaint about adequate reasons, but they were also relied on as error of law because, particularly in relation to the evidence of Mr Sanossian, nothing was said in the judgment about his evidence, leading to the inference that it had not been considered. The grounds were said not to raise a mixed question of fact and law for which leave would have been necessary under s 40 of the Local Courts Act 2007 (NSW).

The Plaintiff claimed to have purchased a Rolex Oyster Perpetual Watch for $32,000 AUD from a jeweller in Syria in 2005. The watch was purchased using monies withdrawn from his parents’ bank account held in Syria. The Plaintiff had authority to use those funds. The Plaintiff was unable to locate any receipt or other documentation relating to the purchase. He could not remember the jeweller from whom it was bought. He had no travel documents relating to the trip during which the watch was bought because he had lost his passport for that period. There was proof of that loss. He travelled into Syria by car.

On 30 June 2014 the Plaintiff renewed his insurance with Chubb. The policy covered loss of property wherever that occurred.

On 13 July 2014 he lost the watch whilst at Copacabana Beach in Rio de Janiero. It either fell off his wrist or was taken from him by an unknown person. He endeavoured to make a complaint to a policeman at the beach but he said that the policeman was not interested. He made no formal report of the loss of the watch to a police station. However, he cut short his trip by two days because of the loss.

The managing director of Monte Cristo Gems Pty Limited, Shahe Sanossian, gave evidence that he had maintained and serviced the Plaintiff’s family’s watches for some years including the Plaintiff’s Rolex Perpetual Watch day/date 18k solid yellow gold 36mm with diamond dial. He last cleaned that watch in about June 2014. He took a photo of the Plaintiff wearing the watch at that time. In August 2014 the Plaintiff rang him to tell him that he had lost the watch in Brazil. The Plaintiff asked him how much a new one would cost.

At the trial the Plaintiff was cross-examined about his purchase of the watch, its loss, and the renewal of the insurance policy. Mr Sanossian was not cross-examined.

The Magistrate’s reasons are on any view fairly succinct. His Honour stated briefly what the claim was about and noted two policy conditions which the insurer claimed had not been complied with relating to proof of loss by the Plaintiff. The conditions are these:

The Magistrate identified two issues which were whether the Plaintiff had standing to bring the claim and whether he had proved the loss of the watch. His Honour first found that the Plaintiff had standing to bring the claim. In doing so his Honour said at paragraph 7,

His Honour summarised the Plaintiff’s evidence concerning the purchase and loss of the watch. He set out the Plaintiff’s and the Defendant’s submissions. His Honour’s decision then followed in these terms:

It may be observed that the conclusion at paragraph 19 is quite inconsistent with the conclusion at paragraph 7 (set out at [12] above).

Thereafter, his Honour set out and briefly discussed s 54 of the Insurance Contracts Act. His Honour’s conclusion was that s 54 was not engaged because there was no act of the insured as contemplated by the section.

The consideration of s 54 is a little difficult to understand. It was relied upon by the Plaintiff to answer any failure that was held to have occurred on its part by not lodging what the insurer said was a proof of loss. That was a condition of the contract that needed to be complied with. However, since the learned Magistrate had already found that the Plaintiff could not be prevented from bringing its action from any failure to lodge a proof of loss, consideration of s 54 became unnecessary.

His Honour then considered briefly s 13 of the Insurance Contracts Act and the submission of the Plaintiff that the insurer was in breach of it by not having paid the claim. The Magistrate correctly held that the section was not breached just because the insurer did not pay the claim. He said the insurer was entitled to request further information to satisfy the proof of loss clause.

Finally, in the section of the judgment headed “Interpretation of the contract” his Honour discussed a number of cases concerning principles of construction of a commercial contract including, in relation to insurance contracts, the decision in McCann v Switzerland Insurance (2000) 203 CLR 579.

His Honour’s conclusion from these cases was this:

The Plaintiff submitted that there were two significant errors which justified the relief sought. The first was that his Honour posed and answered the wrong question by saying in paragraph 17 that the Plaintiff had been unable to provide proof of purchase of the watch. The correct test was whether the Plaintiff had brought himself within the insuring clause of the policy. The Plaintiff said that the policy provided that benefits were payable if the insured suffered a loss that was covered under the policy during the policy period. The relevant benefit was entitled “Deluxe Contents Coverage” and was defined as including “Cover against physical loss or damage to Your contents anywhere in the world”.

The second error was that his Honour failed to provide reasons or adequate reasons explaining why it was that the Plaintiff was unsuccessful in his claim.

The Plaintiff submitted that it must be assumed that the Magistrate rejected his evidence concerning the purchase of the watch but his Honour does not say why he has done so. Further, although his Honour noted the evidence given by Mr Sanossian he made no finding about whether or not he accepted that evidence. Given that Mr Sanossian was not cross-examined, that was a significant matter.

The Defendant submitted that the onus lay on the Plaintiff to prove he had the watch and he lost the watch. It was only by doing that that he could prove his loss under the policy. The Defendant pointed to the Plaintiff’s acceptance that, implicitly, the Magistrate had rejected his evidence. The Defendant submitted that it was apparent from paragraphs 17 to 19 of the judgment that the reason his Honour did not accept the Plaintiff’s evidence was because of the lack of corroborative material there identified. The Defendant submitted that where the Magistrate referred in paragraph 17 to the Plaintiff being unable to “provide proof of purchase” that should be read as “purchase and loss” if the context is taken into account. That is because items number (6)-(8) in paragraph 17 are clearly referring to the loss of the watch.

The Defendant relied on what was said in Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd and Penrith Pastoral Co Pty Ltd [1983] 3 NSWLR 378 by Hutley JA (with whom Samuels JA agreed) at 381:

The Defendant also made reference to Mahoney JA’s judgment at 385:

In Abdel Naser Qushair v Naji Raffoul [2009] NSWCA 329 Sackville AJA (Campbell JA and Bergin CJ in Eq agreeing) said at [52]:

Recently, Harrison AsJ in Zeait v Insurance Australia Limited t/as NRMA Insurance [2016] NSWSC 587 said:

One can perceive a subtle shift in the approach of the Court of Appeal since Tatmar. What the more recent cases stress is the need for both the losing party and an appeal court to understand why it is that the judge reached the view he or she did. That is particularly the case in a case such as the present where there is only an appeal as of right on a question of law. As McHugh JA made clear in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 different considerations apply in such cases.

The policy relevantly provided:

In the policy conditions relating to coverage for damage to property, under the heading “Proof of loss” the following appears:

In the same section under the heading “Legal action against Us” the following appears:

As best as can be determined from the somewhat elliptical reasons of the Magistrate, his Honour seems to have identified proof of purchase of the watch with satisfaction of the proof of loss clause. Even if the opening words of paragraph 17 of the judgment should be read as including proof of the loss of the watch, the Magistrate’s conclusion is simply that the Plaintiff has not proved loss (see paragraph 18). It must be inferred, as the Plaintiff accepts, that the Magistrate has not accepted, principally, the evidence of the Plaintiff. A further inference that can be drawn from paragraphs 17 to 19 is that the reason the Plaintiff has failed is that he did not have any or all of the documents and proof set out in paragraph 17. However, that is not the only other inference that can be drawn.

There are cases, whether involving insurance or other matters, where a plaintiff has no corroborative evidence of essential facts but the Plaintiff’s evidence is believed with the result that he or she is successful in the claim. It was not a requirement of the policy or of the law generally that the Plaintiff in the present case needed to have corroborative evidence to succeed in the claim. The Plaintiff does not know, therefore, whether he failed because his evidence was not believed or because he did not have the matters enumerated in paragraph 17 or for both reasons.

Further, if he was not believed he does not know whether it was all of his evidence or some of it and why the disbelieved evidence was not believed. For example, he may have been believed about the purchase of the watch but not about the circumstances of its loss because his evidence in that regard was sparse and no report of its loss was made to the police. On the other hand, he may have been disbelieved about the purchase of the watch because he did not have any documents relating to its purchase, and that caused the Magistrate to doubt his oral evidence. Or perhaps, the Magistrate disbelieved him by reason of his demeanour.

Further, Mr Sanossian’s evidence, which was not considered at all in the judgment, and about which he was not cross-examined, provided some corroboration of the Plaintiff’s evidence about, at least, being in possession of a Rolex watch of the type described by the Plaintiff. Whilst I accept that Mr Sanossian does not know if the watch he saw and cleaned was the watch said to have been purchased in Syria and which was said to be lost in Rio de Janeiro, there was a need for the Magistrate to say why, in the face of that unchallenged evidence, it did not go some way to support the Plaintiff’s evidence about his possession of the watch shortly before it was lost.

This was a classic case where a claimant on an insurance policy had almost only his own word to prove ownership or possession and loss of the object for which the claim was made. An insurer might take the view in such circumstances that a plaintiff would need to commence proceedings so that his evidence could be given on oath and tested in a court. Paragraphs 17 to 19 of the judgment read as if the Magistrate was considering the matter from the point of view of an insurer in such circumstances, when his Honour had the additional benefit of evidence on oath and cross-examination and, as it happens, the evidence of another witness that provided some small support for the Plaintiff’s claim. I say that the Magistrate appears to have approached it from that point of view because there is no reference anywhere in the judgment to his assessment of the Plaintiff’s evidence nor his assessment of Mr Sanossian’s evidence. His Honour’s focus was only on documents and material that was not provided.

Ultimately, the Plaintiff had to be believed to succeed in this case. It was incumbent on the Magistrate to assess his evidence and explain why it was not accepted. Additionally, when Mr Sanossian’s evidence went a little way to corroborating the Plaintiff it was incumbent on the Magistrate to say either why he did not accept that evidence or to say why, if it was accepted, it did not support the Plaintiff.

The judgment of the court below does not provide reasons that are sufficient to enable this Court, in its appellate role, to gain a proper understanding of the basis of the verdict: Jung v Son [1998] NSWCA 120. The parties, particularly the Plaintiff, do not know why the decision was made and the Plaintiff is entitled to have reasoning in sufficient detail to enable him to understand why he lost: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 422. It is not sufficient that the Plaintiff can infer that his evidence was not accepted. He is entitled to know why that is so.

Additionally, the Magistrate does not seem to have asked himself the correct question which was whether the Plaintiff brought himself within the insuring clause relevant to the loss. His focus on the purchase of the watch appears to have overlooked entirely that it was sufficient that the insured either own or possess the watch. Nowhere in the judgment is the insuring clause nor the definition of “Contents” set out or referred to. The only parts of the Policy in the judgment are the two policy conditions set out at [11] above.

Mr Sanossian’s evidence was of more significance in relation to the issue of possession as opposed to ownership. His evidence demonstrated that the Plaintiff possessed a Rolex watch of the description that the Plaintiff himself also gave and that it was possessed shortly before the alleged loss and the claim on the insurer. That could suggest that, if the Magistrate disbelieved the Plaintiff, it was because he did not accept his evidence about losing the watch on the basis that Mr Sanossian’s evidence, whilst never being able to corroborate purchase, was able to corroborate possession by the Plaintiff. However, there is nothing in the judgment to suggest the Magistrate gave any consideration to possession because of his mis-directed focus on the purchase of the watch and the absence of documents generally.

In my opinion the Plaintiff has demonstrated that the Magistrate’s reasons are inadequate. I do not consider that as a matter of discretion I should refuse to order a re-trial. It is not the case that, despite the inadequate reasons, only one conclusion is available on the evidence. The proceedings should be remitted to the Local Court to be dealt with by a different magistrate since it is likely, that the Magistrate has impliedly made credit findings.

I make the following orders: