By: Richard Hern
Angus & Erksine-Shaw v Ace Insurance Ltd & lloyds' underwriters (ak hc, cooper j, 24/2/14)

Justice Cooper (who wrote the Crystal Imports decision) is certainly making his mark as far as insurance law. In his decision in Angus & Erskine v ACE Insurance & Lloyds' Underwriters of 24 February 2014, he engaged in an exhaustive analysis of an arson / attempted fraud on the insurers.

The Anguses owned the Pinelands Hotel in Kawarau. The main building was destroyed by a deliberately lit fire in July 2010. Mr Angus claimed that intruders had talked their way into the property in the early hours after closing, doused him with petrol and threatened to set him alight as part of a robbery. The intruders had then set light to the main part of the hotel complex comprising of the bar / restaurant.

The police had formed the view that Mr Angus had been responsible for starting the fire. Nonetheless, the Anguses commenced proceedings against the underwriters. The underwriters in turn pleaded as an affirmative defence that Mr Angus had deliberately started the fire.

The case
Justice Cooper referred at length to the standard of proof required, citing the Court of Appeal's decision in AMI Insurance Ltd v Devcich [2011] that this was the civil balance of probabilities – rather than some intermediate point between the criminal and civil standards. But he also commented that the civil standard should be flexibly applied in order to account for the seriousness of the allegations.

In the circumstances of this case, it was noted that where crucial issues turned on Mr Angus' credibility (and this was a significant component of the case), the assessment of the evidence must take account the seriousness of the allegations. There was no evidence that Mr Angus had previously acted dishonestly. Indeed, Justice Cooper was obliged to consider the underwriters' account against a background of evidence given in support of the Anguses. This background intimated that Mr Angus was an "honest business person" and his prior conduct was such that it was inherently unlikely that he would deliberately burn down the hotel and make a false insurance claim.

However, Justice Cooper also cautioned himself that resolution of issues depended not on the impression Mr Angus gave giving evidence, "but rather on what is called the logic of events." With respect to this he cited with approval Fox v Percy (a 2003 decision by the High Court of Australia), in which that Court commented at length on the difficulty "judges (or anyone else) [have] to tell truth from falsehood accurately on the basis of appearances. Considerations such as these have encouraged judges … to limit their reliance on the appearances of witnesses and to reason their conclusions … on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical."

Justice Cooper embarked on a comprehensive analysis of Mr Angus' evidence, along with the respective experts called by both the Anguses and the underwriters. This included the fire cause and origin experts and forensic accountants.

He concluded that in weighing this evidence on the balance of probabilities scales and on an analysis of this evidence, Mr Angus had lit the fire with a motive of financial gain – Mr Angus possibly labouring under the misapprehension he could secure a cash settlement under the policy (and not appreciating that the policy contained a condition that the insurers could insist on reinstatement).

It became apparent during this analysis that there was considerable evidence of unsuccessful attempts at selling the hotel as well as declining profitability; a key finding which supported the inherent improbability of Mr Angus' account of what occurred. This was that Mr Angus failed to set the alarm on leaving the main building, and petrol detected on Mr Angus' shoes compared to the accelerant on his other clothing – putting Mr Angus in the vicinity of the petrol as it was poured in the main building at a time when he would not have been present if his account was correct.

The conclusion
Accordingly, Justice Cooper found that Mr Angus did deliberately set the fire for the purpose of making a false insurance claim, and found for the underwriters.

Finally on a rather tragic note, Mr Angus died within days of giving evidence.

What is particularly interesting about the decision, is that so much involved a careful evaluation and assessment of witnesses whose evidence was seemingly credible, evaluating a great deal of circumstantial evidence, or analysis of highly technical expert forensic evidence.
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