Tag Archives: fraud

Angus v ACE Insurance Ltd: proving arson

In DW Angus and Ors v ACE Insurance Ltd and Anor [2014] NZHC 258 the High Court concluded it was more likely than not that one of the plaintiffs, Mr Dennis William Angus, had committed arson. The insurers were therefore justified in not paying an insurance claim for loss and damage resulting from fire to a building. The only legal issue was the standard of proof, which warrants attention. Most of the judgment is a careful review of the evidence resulting in a determination adverse to Mr Angus. This also merits scrutiny because it is a case study in how to satisfy the Court that arson has occurred.

His Honour Justice Cooper’s judgment runs to 91 pages (339 paragraphs). Most of the decision is devoted to an extremely careful examination of the factual and expert evidence. The word “extremely” is used advisedly, and without any exaggeration. As a result of the degree of care taken in this aspect of the judgment, it seems highly unlikely that any appeal court would seek to disturb the findings made.

While this makes it, by definition, a case decided on its own facts, it still makes worthwhile reading. The decision appears to be the end result of a very thorough case assembled by the insurers’ legal team. An insurer looking to decline a claim on the basis of fraud or fraudulent conduct such as arson would be well advised to consider the way the insurers presented their case in this litigation.

A procedural issue arises in this case which would make it easy to inadvertently misreport. The specific factual findings in the case culminated in the conclusion that Mr Angus had deliberately started the fire in question. It followed that the insurers were not liable to indemnify the plaintiffs which consisted of different combinations of Mr Angus, his wife Mrs Angus, and a trustee. The inclusion of the trustee as a party resulted solely from the trustee’ earlier appointment to family trusts and he played no part in the litigation. Responsibility for the arson should be restricted to Mr Angus only, on the basis of the Court’s specific findings of fact.

The physics of fire and the frailty of the human condition mean that arson cases come up with sad regularity in the law reports. In one sense, it is a very insurance-y type of situation, because at its heart the question is whether there was a fortuity. In another sense, it involves almost no issues of legal principle concerning insurance contracts or interpretation. Usually the situation is either that, on the evidence, arson is proved (insurer must pay the claim) or it is not (the claim is forfeit by dint of fraud and in any event the policy is not triggered).

The legal issue that tends to arise, and did so in this case, is the standard of proof. The Court referred to the Court of Appeal’s decision in AMI Insurance Ltd v Devcich [2011] NZCA 266, also an arson case. In Devcich the trial judge, His Honour Justice Lang, had made many factual findings adverse to the owners but in the end held that the insurer had not established its claim to the required standard. The evidence left the Court in a state of “genuine uncertainty” and that the judge was not “sufficiently sure” that Mr Devcich started the fire. In discussing the standard of proof, Justice Lang had noted that the relevant insurer, AMI, had a reasonably heavy onus, because it had to establish that Mr Devcich had been guilty of conduct that was criminal in nature, and involved allegations of fraudulent conduct. Lang J described that standard as not as high as the criminal standard of proof beyond reasonable doubt, but not far removed from it. He considered that AMI was required to adduce “clear and convincing evidence” that its allegations were correct.

The Court of Appeal in Devcich considered that this was to suggest that because of the nature of the allegations the standard of proof required was higher than the ordinary balance of probabilities test in civil cases. This was incorrect, it said. There is no intermediate test between the criminal and civil standards, as was held by the New Zealand Supreme Court in Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 where the Supreme Court stated at paragraph 107:

The civil standard has been flexibly applied in civil proceedings no matter how serious the conduct that is alleged. In New Zealand it has been emphasised that no intermediate standard of proof exists, between the criminal and civil standards, for application in certain types of civil case. Balance of probabilities still simply means more probable than not. Allowing the civil standard to be applied flexibly has not meant that the degree of probability required to meet this standard changes in serious cases. Rather, the civil standard is flexibly applied because it accommodates serious allegations through the natural tendency to require stronger evidence before being satisfied to the balance of probabilities standard.

Cooper J applied this approach in the instant case. He stated at paragraph 18:

I consider this means that in a case such as the present, where the crucial issues turn on the credibility of Mr Angus, the assessment of the evidence must take into account the seriousness of the allegations and the fact that there is no evidence he has previously acted dishonestly. These are considerations which mean that there needs to be strong evidence that supports the defendants’ allegations in order to meet the balance of probabilities standard.

In doing so, Angus adds further weight to Z v Dental Complaints Assessment Committee and Devcich that in all civil cases the standard of proof is on the balance of probabilities and no higher standard, but in “serious cases”, strong evidence will be required to meet the standard.

One might meekly comment that strong evidence being required to meet a lower standard constitutes, in effect, a higher (potentially intermediate) standard. Greater minds than your correspondent will be left to the task of considering that thought.