Citation: Trajkovski v Commonwealth Insurance Ltd (No. 2) [2020] NSWDC 694
Court: District Court of NSW
Date: 13 November 2020
Judge: Abadee DCJ
Background
The plaintiff held a home contents insurance policy with the defendant insurer, covering his apartment in Brighton-Le-Sands from September 2012 to September 2013. The policy included cover for specified contents (jewellery listed individually, up to $176,590) and general contents, with theft among the insured events.
The plaintiff alleged that on or around 3 September 2013, while he was away in Goulburn and Queanbeyan, his apartment was broken into through a hole in the bedroom ceiling. He claimed a safe containing jewellery collected over a lifetime had been removed, along with other items. He lodged a claim for an aggregate loss initially estimated at approximately $323,600, later refined to $173,590.
The insurer refused the claim in December 2013, asserting fraud. The plaintiff commenced proceedings in 2019, seeking damages for breach of the insurance contract together with pre-judgment interest. The central dispute at trial was whether the ceiling hole was created by an intruder entering from above, or was fabricated to disguise access through the front door.
Legal Issues
- Whether a theft occurred in a manner covered by the insurance policy
- If a covered theft did occur, the extent of the plaintiff's entitlement to indemnity
- Whether the plaintiff committed "fraud on the event" under section 56(1) of the Insurance Contracts Act 1984 (Cth), meaning he fabricated or staged the theft itself
- Whether the plaintiff committed "fraud on the claim" under section 56(1), meaning he made false statements when lodging the claim even if a theft did occur
Decision
Was there a theft?
The court found that the plaintiff had not established, on the balance of probabilities, that a theft of the jewellery occurred. Counsel for the plaintiff had conceded that the plaintiff's success substantially depended on the court accepting him as a credible witness. The central factual contest turned on conflicting expert evidence about whether the ceiling hole was created from above or below. The court was not satisfied that the plaintiff's account of the alleged break-in was reliable enough to discharge his evidentiary burden.
Fraud on the event
Despite its verdict for the defendant, the court did not find that the insurer had established fraud on the event under section 56 of the Insurance Contracts Act. The insurer bore the burden of proving that the plaintiff deliberately staged or fabricated the theft, and the court was not satisfied to the requisite standard that this had been made out. Notably, the court found that no motive for fraud had been established on the insurer's part of the case.
Fraud on the claim
The insurer also argued that, even if a theft occurred, the plaintiff made fraudulent statements when compiling his Schedule of Loss, including a specific item (item 12) that may not have been in the plaintiff's possession. The court acknowledged some concern about this item but accepted there was a plausible explanation related to information the plaintiff may have received from another family member. As with the fraud-on-the-event argument, the insurer had not established any motive. Accordingly, the section 56(1) defence also failed on the fraud-on-the-claim limb.
Outcome
Because the plaintiff could not establish that a covered theft occurred, judgment was entered for the defendant. The fraud defences under section 56 of the Insurance Contracts Act were separately considered and both failed, meaning the defendant's success rested entirely on the plaintiff's failure to prove his underlying claim.
Orders Made
- Verdict and judgment for the defendant
- The plaintiff is to pay the defendant's costs as agreed or assessed
- Liberty to apply on 14 days' notice, by Notice of Motion supported by evidence not exceeding five pages, for variation of the costs order
- Exhibits to be returned within 28 days
Key Takeaways
- The District Court confirmed that the burden of proving the occurrence of an insured event rests on the insured. Where the claim turns substantially on the insured's credibility and that credibility is not accepted, the claim will fail even if the insurer does not affirmatively establish fraud.
- A section 56 fraud defence under the Insurance Contracts Act 1984 (Cth) carries its own burden. An insurer asserting fraud, whether as to the event or the claim, must establish it to the civil standard, which in cases of serious allegations requires a correspondingly high degree of satisfaction consistent with Briginshaw v Briginshaw.
- The two fraud limbs under section 56 are treated as distinct: fraud on the event (fabricating the underlying incident) and fraud on the claim (making false statements in the claims process) were each analysed and determined separately.
- Absence of any established motive was a material factor in the court's rejection of both fraud arguments, even where some aspects of the plaintiff's evidence raised questions.
- A plaintiff's inability to prove the insured event and an insurer's inability to prove fraud can coexist in the same proceedings: the defendant here succeeded only on the first of those grounds.
Legislation and Cases Referenced
Legislation
- Insurance Contracts Act 1984 (Cth), ss 54, 56, 60
- Evidence Act 1995 (NSW), s 140
Cases
- Briginshaw v Briginshaw (1938) 60 CLR 336
- Wallaby Grip Ltd v QBE Insurance (Australia) Ltd (2010) 240 CLR 444
- Carr v Finance Corporation of Australia (No 1) (1981) 147 CLR 246
- Water Board v Moustakas (1988) 180 CLR 491
- McLennan v Insurance Australia Ltd [2014] NSWCA 300
- Blacktown City Council v Hocking [2008] NSWCA 144
- Vidal v NRMA Insurance Ltd [2005] NSWCA 390
- ASIM v Penrose [2010] NSWCA 366
- Palmer v Dolman [2005] NSWCA 361
- Sgro v Australian Associated Motor Insurers Ltd [2015] NSWCA 262
- Tiep Thi To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279
- Insurance Manufacturers of Australia Pty Ltd v Heron (2006) 14 ANZ Ins Cas 61-669
- Walton v The Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Ins Cas 61-620