Proving a loss for insurance purposes; inadequacy of reasons as an appeal ground

In Kalloghlian v Chubb Insurance Company of Australia Ltd [2016] NSWSC 902 (the Court’s summary is here), a man said he purchased a Rolex in Syria in 2005.  He insured his things with Chubb against loss anywhere in the world.  The policy was described as ‘Deluxe’.  It specifically insured items  which the insured owned as well as things he possessed.  The insured said he lost the watch on Copacabana Beach in July 2014.  The police declined to take a report.  He had no receipt from its purchase.  He could not remember from which jeweller he had purchased it.  He had lost his passport for the period of the trip to Syria.  Chubb declined the claim.  The insured sued.  The Magistrate dismissed the suit.  The insured appealed. The Supreme Court ordered a new trial.

The decision is hardly ground breaking.  But it is simple.  And it is useful to be reminded about the following:

  1.  An insured may prove a loss by giving oral evidence of the loss.  A lack of documentary or other corroboration is not fatal.  It is just something to be assessed in considering whether the plaintiff has satisfied the Court it is more likely than not that he suffered the loss.
  2. That is so even where it is a condition of cover under the policy that the plaintiff provide various proofs of ownership and of loss.  That is because s. 54 of the Insurance Contracts Act 1984 excuses breaches by the insured of policy conditions where the breach cannot have caused the loss, except to the extent of any prejudice to the insurer.
  3. Even busy decision makers in over-worked jurisdictions have to identify controversies raised by the parties which are necessary to determine in order to find for one party or the other, and explain why they resolved those controversies the way they did.  A failure to do so will result in the decision being set aside.  Robert Sheldon QC’s blog keeps an eye on this area of law.  See here and here and here.  The Court’s summary of the obligation in New South Wales to give adequate reasons is set out in full below.
  4. Where the facts are ascertained sufficiently that there is only one correct decision, the appellate tribunal may substitute its decision.  Where, as here, however, it was necessary to take into account how witnesses presented, the appellate tribunal will remit the case to be re-heard, where necessary (as here) by a new decision maker.

The obligation to give proper reasons, especially where there are contests of oral evidence, is an important one and should be jealously guarded.

The insured was said not to have complied with a condition of the policy:

‘You must submit to Us, within 60 days after We request, Your signed, sworn proof of loss providing all information and documentation We request such as the cause of loss, inventories, receipts, repair estimates and other similar records.’

All he had was his word and evidence from the family watch repairer who serviced a Rolex of the same description in June 2014 and received a call in August 2014 advising the loss and enquiring how much a new one would cost.  The repairer had also taken a photo of the man wearing the Rolex he had serviced. (Some people obviously have much too much money, because this one cost $32,000 to buy in 2005. The cover was limited to $25,000 per item, so that is what the man claimed.)

The plaintiff said that his non-compliance with the policy condition was excused by s. 54 of the Insurance Contracts Act 1984, which says, subject to some conditions:

‘where the effect of a contract of insurance would [otherwise] be that the insurer may refuse to pay a claim … by reason of some act [including omission] of the insured … after the contract was entered into …, the insurer may not refuse to pay the claim by reason only of that act but the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act.’

The Magistrate dismissed the claim, apparently on the basis that the insured had failed to prove purchase.  He did not expressly say that he did not accept the man’s evidence, or which aspect of it, or why.  He ignored completely the evidence of the repairer, who was not cross-examined and whose evidence provided some corroboration of the man’s possession of the watch shortly before he says he lost it.

Davies J of the Supreme Court of NSW allowed the appeal on the basis of a failure to give adequate reasons, though some of the reasons which were given appeared to be self-contradictory and also not to be well founded.  Proof of purchase did not seem to be a necessary element of proof of entitlement to cover under a policy which insured against loss of owned items as well as things in the insured’s possession, for example.  The insured could not work out why he lost from the reasons.  He could not meaningfully prosecute an appeal, and nor could an appeal tribunal meaningfully deal with an appeal on grounds other than a failure to give reasons.

The Court summarised the law in relation to the obligation to give adequate reasons as follows:

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

[52]   The principles relating to the obligation of a trial judge to give adequate reasons for making findings of fact, including findings said to be demeanour based, were summarised by McColl JA (with whom Ipp JA and Bryson AJA agreed) in Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110. Her Honour’s statement of the principles was accompanied by detailed citation of authority. The following is a summary, with reference only to some of the leading authorities:

(i) The giving of adequate reasons lies at the heart of the judicial process, since a failure to provide sufficient reasons can lead to a real sense of grievance because the losing party cannot understand why he or she lost (at [57]): see Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, at 442, per Meagher JA.

(ii) While lengthy and elaborate reasons are not required, at a minimum the trial judge’s reasons should be adequate for the exercise of a facility of appeal, where that facility is available (at [56]): see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, at 260, per Kirby P; at 269, per Mahoney JA.

(iii) The extent and content of the reasons will depend on the particular case and the issues under consideration, but it is essential to expose the reasoning on a point critical to the contest between the parties (at [58]): see Soulemezis v Dudley, at 259, per Kirby P; at 280, per McHugh JA. This may require the judge to refer to evidence which is critical to the proper determination of the issue in dispute (at [62]): Beale v GIO, at 443, per Meagher JA.

(iv) Where credit issues are involved, it is necessary to explain why one witness is preferred to another. Consequently, bald findings on credit, where substantial factual issues have to be addressed, may not comply with the common law duty to give reasons (at [65]): Palmer v Clarke (1989) 19 NSWLR 158, at 170, per Kirby P (with whom Samuels JA agreed).

(v) Where an appellate court concludes that the trial judge has failed to give adequate reasons, the court has a discretion whether or not to direct a new trial. If, despite the inadequate reasons, only one conclusion is available, a new trial may not be necessary (at [67]).’

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

‘[28]   It is trite law that if a court fails to give sufficient reasons for its decision it constitutes an error of law: see Wang v Yamamoto [2015] NSWSC 942; and Jung v Son [1998] NSWCA 120.

[29]   In Wang v Yamamoto at [35]-[38], I stated:

“[35] It is not in dispute that a Magistrate is obliged to provide adequate reasons and not to do so constitutes an error of law: see Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 at [41] per Santow JA.

[36] In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 340 Meagher JA at 422 stated:

A failure to provide sufficient reasons can and often does lead to a real sense of grievance that a party does not know or understand why the decision was made: Re Poyser and Mills Arbitration [1964] 2 QB 467 at 478. This court has previously accepted the proposition that a judge is bound to expose his reasoning in sufficient detail to enable a losing party to understand why it lost.

[37] In Stoker, Santow JA at [41] said that “It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings.” However, “the extent and the content of reasons will depend upon the particular case under consideration and the matters in issue. While a judge is not obliged to spell out every detail of the process of reasoning to a finding, it is essential to expose the reasons for resolving a point critical to the contest between the parties”: see Pollard v RRR Corporation Pty Limited [2009] NSWCA 110, McColl JA at [58] (with whom Ipp JA and Bryson AJA agreed).

[38] In Soulemezis v Dudley (Holdings) Pty Ltd (1987) NSWLR 247, McHugh JA at 281 stated:

“In a case where a right of appeal is given only in respect of a question of law, different considerations apply from the case where there is a full appeal. An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less elaborately than an issue involving a question of mixed fact and law. If no right of appeal is given against findings of fact, a failure to state the basis of even a crucial finding of fact, if it involves no legal standard, will only constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done. If, for example, the only issue before a court is whether the plaintiff sustained injury by falling over, a simple finding that he fell or sustained injury would be enough if the decision simply turned on the plaintiff’s credibility. But, if, in addition to the issue of credibility, other matters were relied on as going to the probability or improbability of the plaintiff’s case, such a simple finding would not be enough.”

[30]   In Jung v Son, Stein JA stated (at 6):

“While a judge does not have to state reasons for every aspect of the case, his reasons must be sufficient to satisfy the requirements of Pettittv Dunkley [1971] 1 NSWLR 376. The reasons must be sufficient to enable an appellate tribunal to gain a proper understanding of the basis of the verdict. Not to do so is an error of law (Asprey JA at 382 and Moffitt JA at 388). Failure to give reasons also makes it impossible for an appellate tribunal to give effect to a plaintiff’s right of appeal. Issues critical to the case, as these were, must be dealt with by reasons (Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728).”

In short, the judicial officer should make it clear what he or she is deciding and why.’

  1. 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.’
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